Medical Credit Cards Are Actually a Bad Idea.
It’s no secret that healthcare in the United States is difficult to afford, even for those with insurance. In fact, approximately 20% of U.S. households have some amount of medical debt, and in 2021, more than half of all bills in collections were medical.
High out-of-pocket expenses and unexpected bills can make health financing options like credit cards and loans the best option for paying for everything from hearing tests to routine dental procedures and emergency room visits. Your service provider may even promote medical credit cards like CareCredit ( which has 11.7 million cardholders ) and health loans offered by companies like AccessOne, Cherry, and PayZen.
However, while health cards and loans can be convenient and have attractive payment plans and promotional rates, in the long run you may end up with more debt, worse credit and fewer financial assistance options, which is why consumer credit experts strongly recommend against them .
How does medical financing work?
As the Consumer Financial Protection Bureau notes , there are two common methods of financing healthcare:
Medical credit cards can be used to pay for services offered by your doctor or dentist (traditional elective procedures or care not covered by insurance), although you may be able to charge hospital fees or other bills. These cards often charge 0% interest for a certain promotional period (6-18 months), so you can avoid interest if you pay off your balance quickly.
When you take out a medical loan, you pay your bill in installments that are used to reimburse your healthcare provider. As with credit cards, there is usually deferred interest that increases significantly after a certain period of time.
The CFPB notes that health care providers have many incentives to offer (or even promote) financing options, all of which amount to getting paid more, sooner. For example, medical financing may influence patients to choose or delay treatment for which they would otherwise pay at the standard price. Providers who use these options also receive full payment faster and have fewer billing and collection issues.
Why health care financing is bad for consumers
Medical credit cards and loans are risky for a number of reasons. First of all, interest rates are even higher than a regular credit card – averaging 27% compared to 16% . If you don’t pay off your balance within the promotional period, you could end up with a lot of debt very quickly. In some cases, unexpected fees may also result in interest on the amount already repaid.
If you’re forced to get a medical credit card or loan, you could miss out on insurance benefits you’re actually entitled to or end up paying for expensive care you don’t need.
You may also have more affordable options than medical financing. For example, some hospitals and health care providers offer income-based financial assistance (including discounted or free care) or at least low- or no-interest payment plans. You can also negotiate your balance directly with the hospital or clinic.
With these options , you’ll have more consumer protection if your bill goes unpaid . Medical credit card debt is treated the same as any other credit card delinquency listed on your credit report.
How to avoid financing medical services
You should always check your insurance benefits before undergoing treatment. (If your insurance company denies coverage for unplanned treatment, you can appeal.) You should also evaluate whether tests or procedures are necessary, especially if they seem out of reach, and don’t hesitate to get a second opinion.
Next, avoid charging your credit card, medical or otherwise. Experts suggest asking about financial assistance, alternative payment plans offered directly through providers, or charity programs as described above. Even a personal loan is recommended instead of a credit card.