In parts of the country where electricity rates are low, a heat pump can provide a cheaper alternative to a standard, fuel-based furnace. But it's important to consider the outside climate as well. In temperatures under 40 degrees Fahrenheit, compressing heat from outside air becomes problematic, and a system of electric or gas-fired resistance coils (essentially a mini-furnace) kicks in to provide heating for your home. These are not as efficient as a traditional furnace. Furnaces, meanwhile, can't effectively cool hot summer air and, without the addition of an air conditioner — which is actually a one-way heat pump — won't be able to cool your home.
Ultimately, the choice between a furnace and heat pump comes down to your climate, the cost of your electricity and gas and which type of heating you prefer.
Editor's note: This is an updated version of an article that was originally posted on April 19, 2013.
Did you choose a heat pump for your home? Tell us why in the comments.