The average HELOC came into this year around 7.6%, the cheapest since 2022, and Bankrate's forecast has it near 7.3% before the year is out. For anyone who remembers lines above 10% in early 2024, this is a different world.
So does the strategy get better when rates fall? Fair question, and the fair answer starts with a concession: yes, lower rates help. On a $20,000 balance, the difference between 8% and 7.3% is about $140 a year. Real money. Take it.
But paycheck parking never ran on cheap rates. It runs on two things the Fed doesn't control: lines of credit generally charge interest daily, and most households leave thousands of dollars sitting idle between paydays. Park the paycheck against the line and those idle dollars offset interest every day they'd otherwise sit. That works at 7%. It worked at 10%, and arguably mattered more then, because every idle dollar was passing up a bigger daily saving. The rate changes the size of the win, not the direction.
Where a cheaper line does change the math is chunking. When you pull a chunk from the line to knock down a fixed-rate loan, you're trading the loan's rate for the line's rate for a while, so the spread between the two decides how quickly you want that chunk paid back down. A cheaper line widens your margin for error. The full walkthrough, with a month mapped out, is on the How It Works page.
Variable means variable. The same mechanism that lowers your line when the Fed cuts will raise it when the Fed surprises everyone. My rule is that the plan has to survive the line going up two points. If it only pencils at today's rate, it's not a plan, it's a bet.
Falling rates also hit the other side of your household ledger, the savings side, and that story is less cheerful. Today's post on the main blog covers both halves.