Medical credit cards or lines of credit have become tempting options for consumers who find themselves with big bills or no insurance at all. In 2010, US consumers paid over $45 billion in medical expenses with credit cards and that number is only expected to grow. So a card just for your health care seems to make sense. However, it’s important to remember that these cards are often no different from an ordinary credit card—and are sometimes worse.
Some medical credit cards are designed to cover elective procedures—those that your health insurance won’t cover such as dental exams, chiropractic, Lasik treatments, or cosmetic surgery. Others can be used to pay your co-pays and deductibles.
But with any credit card, the same traps can exist: Low introductory rates to hook you in, hidden fees, or changing minimum payments are all common with medical credit cards. Some cards impose retroactive interest rate increases—if you are late on a payment, they can raise your rate on current balances retroactively. Increases of up to 30% are possible.
The instant transactions that credit cards allow also prevent you from having a chance to review bills before you pay them. Medical billing errors are common, and if you pay for a procedure on the spot, you are much less likely to catch them.
But most importantly, what you charge on medical credit cards can impact your credit report.
Putting your health care expenses on a credit card converts them from medical debt to revolving consumer debt. Medical debt does not affect your credit history unless it goes into collections, but consumer debt can if you have late or missed payments.
Before you get a card:
DO consider your alternatives. Health savings accounts (HSAs) or flexible spending accounts (FSAs) are accounts that allow you to save money tax-free to be used on medical expenditures. If your employer offers one of these benefits, consider saving up for your medical expenses ahead of time. An increasing number of these accounts are now providing consumers with debit cards too.
DO check if your provider offers payment plan options. Almost all hospitals and many physician practices will do this at better rates than a card will offer.
DO beware of the card issuer. Some credit card companies market their cards to providers rather than directly to consumers. These providers may get commissions for each patient they sign up. So while it may seem sound and reliable to get a card offered by your hospital or doctor, it may be no different from one you’d find on your own.
DON’T get a card unless you understand all the terms. Read the rules before signing up and make sure you have a plan for paying off debt if you know you’ll use the card. Remember, credit cards should make your finances easier, not worse, so use them as tools, not as solutions.