Medical Credit Cards: A Double-Edged Sword for Patients

Medical credit cards have become a popular financing option for patients seeking to cover the cost of medical procedures and treatments. These cards, offered by healthcare providers and financial institutions, allow patients to pay for medical services in installments, often with deferred interest promotions. However, the high interest rates and fees associated with medical credit cards can make them a risky financial decision for patients. In this article, we will explore how medical credit cards work, the risks they pose, and alternative financing options for patients.

How medical credit cards work
Medical credit cards are designed to cover the cost of medical procedures and treatments that are not fully covered by insurance. These cards are often issued by healthcare providers in their offices, making it convenient for patients to apply and use them for their medical expenses. Medical credit cards typically offer deferred interest promotions, where no interest is charged if the balance is paid off within a certain time frame. However, if the balance is not paid off in full, interest is charged retroactively from the date of purchase.

Risks of medical credit cards
The high interest rates and fees associated with medical credit cards can make them a risky financial decision for patients. According to the Consumer Financial Protection Bureau (CFPB), the average interest rate for medical credit cards is around 24%, compared to around 16% for general-purpose credit cards. Additionally, deferred interest promotions can lead to unexpected and significant interest charges if patients are unable to pay off their balances in full within the promotional period.

Patients may also face other risks when using medical credit cards, such as:

1. Higher fees: Medical credit cards often come with higher fees than traditional credit cards, which can make it more difficult for patients to pay off their balances.
2. Lower credit limits: Medical credit cards typically have lower credit limits compared to traditional credit cards, which means patients may not be able to finance as much of their medical expenses as they would like.
3. Potential for unnecessary care: Financing medical care through a provider may lead to being prescribed more expensive treatments than necessary, as providers may be more likely to recommend treatments that generate higher revenue.

Alternatives to medical credit cards
Patients who are considering using a medical credit card should explore alternative financing options to secure lower prices for their medical services. Some alternatives include:

1. Negotiate a payment plan: Patients can ask their healthcare provider to set up an installment plan with them, allowing them to pay for their medical services over time without incurring interest charges.
2. Ask for charity care: If a patient has low income and is being treated at a hospital, they can ask if they qualify to receive Charity Care, a state-run program that requires hospital staff to provide services for free or at a reduced cost to those who meet eligibility requirements.
3. Seek public assistance: Patients can research programs available in their area, such as dental services offered for free at many public health facilities, especially if they're a veteran or have low income.
4. Budget & save: If a procedure isn't urgent, patients can put away some of their income every month until they have enough to cover the cost. This can also serve as an emergency fund for unforeseen expenses.
5. Get a 0% credit card (without deferred interest): If a patient has good credit, they can shop around for traditional 0% credit cards that allow them to spread payments over a certain period without incurring finance charges. However, they should ensure the card doesn't come with a deferred interest policy and use a credit card calculator to determine monthly payments needed to be debt-free by the end of the card's introductory period.
6. Seek a medical loan with a lower interest rate: Lenders such as American Healthcare Lending and East Bridge Funding offer installment loans designed specifically to cover healthcare expenses but at more affordable terms. American Healthcare Lending offers rates starting at 5.99%, while East Bridge Funding offers 0% financing for up to 18 months (with no deferred interest feature). However, East Bridge Funding loans can only be used at specific healthcare facilities, so patients should carefully review the terms of any offer before signing up.
7. Talk to a credit counselor: If a patient struggles with medical debt, they can contact a professional to help them see a clear picture of their finances and find room in their budget to cover a procedure they need. Visiting a reputable credit counselor is an inexpensive (often free) and effective option.
8. Pay as you go: Patients can ask to be billed for each visit instead of up front for all the required visits in their treatment plan. That way, they won't lose the money if they switch to a different provider or stop treatment halfway.

In conclusion, medical credit cards can be a convenient way for patients to finance their medical expenses. However, the high interest rates and fees associated with these cards can make them a risky financial decision. Patients should explore alternative financing options and carefully consider the risks before using a medical credit card. By doing so, they can potentially secure lower prices for their medical services and avoid the high interest rates and fees associated with medical debt credit cards.