Medical costs continue to climb and many people now find that they also have higher out-of-pocket medical expenses. Medical bills are enough to make you sick on top of whatever sends you to the doctor. Medical expenses are contributing factors in more than 60% of personal bankruptcy filing, according to a study in the American Journal of Medicine.
It's not surprising then, that increasingly health care providers are “helping” their patents by encouraging them to turn to medical credit cards. It's not uncommon to find your veterinarian, dentist, dermatologist, hospital, ophthalmologist, audiologist, or other health care provider offering the card as a way to deal with a health expense that is challenging or unaffordable. It doesn't hurt either that they get paid right away when you just say, “charge”.
Medical credit cards may seem like a solution to what ails your wallet, but maybe not.
Not ideal for the financially strapped
“If you're financially strapped, these cards may not be the best option for you. Personally, I say exhaust all other options before you use a medical credit card,” says Mark Rukavina, principal, Community Health Advisors, which assists hospitals to ensure that they are in compliance with new regulations regarding financial assistance, among other services.
What's his concern? “If you can't handle the payments or pay late, you magnify the problem of not being able to pay your medical bill, by exposing yourself to having to pay late fees and interest, in additional to the original cost of the services you received,” says Rukavina.
Then too, much like other credit cards, you might get wowed by a zero percent interest offer good for a specified period of time, but if you don't pay the entire balance within the promotional period, “The company goes back and adds interest retroactively, so you essentially only delayed paying interest,” explains Katie Moore, a financial counselor with Greenpath Debt Solutions. Interest rates for these cards are much like retail cards and can be in the 20% range, she says.
Quite frankly though, Ed Mierzwinski, consumer program director for U.S. Pirg, a consumer advocate group, says, “I can't think of any benefits to the cards, only surprises. The big sales pitch is deferred interest – unlike a regular credit card, interest may not be charged immediately, only after several months or a year. That is the pitch, but in practice, there are a lot of complaints about deceptive or confusing requirements. You may end up paying lots of interest,” he warns.
That is a reality that Paul Kuzmickas, a bankruptcy attorney with Luftman, Heck & Associates, has seen first hand. “Many of my clients feel scammed and think having the card hurt their situation. Many people complained that it was not clearly explained that in order not to pay interest they had to pay their bill in full within a certain time period,” says Kuzmickas, Furthermore, while maybe someone has the best intention of paying off the balance on the card, they may unexpectedly have to use the card again. “You're adding more to the balance that must be paid. Unless you get your promotional period extended, you may be hit with all that accrued interest, even if you think you 'paid it off' by paying the original balance amount,” he says.
Then too, since the cards often have a high line of credit, people can be tempted to have more elective procedures, thus increasing their balance, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.
Consumers paying out of pocket are generally charged the providers' full price – rates that are far higher than those Medicare and private insurers pay, says Howard Dvorkin, founder of ConsolidatedCredit.org. Know too, that when you pay with a credit card, the health care provider can charge the full rack rate and you lose the ability to negotiate, he says.
Play the game smart
Meredith Jones, not her real name, had a good experience using CareCredit to cover $2,500 in unexpected dental costs. “I chose an 18 month payment plan with a monthly payment of about $140. I was able to pay it off early. It was nice though to have flexibility of low monthly payments without ad added cost,” says Jones.
If you can pay off the bill within the promotional time period, then maybe you come out ahead, but Moore says she would much rather people save money for a procedure. “If you need it for an emergency surgery for your pet, then I could see using one of these cards.”
The benefits of using financing options like CareCredit include the ability to plan, budget and pay for certain elective healthcare procedures over time, often enabling access to care recommended by their provider or veterinarian, that is not covered by insurance, says Cristy Williams, a spokeswoman for CareCredit.
If you do apply for a medical credit card, be clear on the fine print. For example, you may get a zero percent or low interest rate for a specified period of time, but what will it be afterward? Be clear on what's covered and what's not. According to Williams, CareCredit cannot be used for emergency room visits, chronic and acute care needs, or to finance existing hospital obligations.
Remember, “It is a credit card. Some people don't even realize it's a credit card,” explains Moore. It is treated just like other cards. “Applying for it will place an inquiry on the credit report, late payments will be reported, as well as the credit utilization ratio, all of which will impact the credit score,” says Cunningham.
Rukavina, suggests that if you must “charge” your services, use a credit card you have, rather than signing up for a medical credit card. Better still, he says to see if your provider has a charity care policy, and whether you qualify, as you may get a discount, or have your bill completely written off. Ask too about whether there are sliding scale fees, or if the provider has their own extended payment plan that may not charge interest, or late fees. “A medical credit card should be your last resort,” he says.
The bottom line, says Dvorkin, “So like many things in life, using a medical credit card for a procedure depends on your situation, how needed the procedure is, how long it will take you to pay it off, and whether or not you can get a better deal if you just make payments on your own directly to the hospital or doctor.”