Should You Use a Medical Credit Card?

According to the Health System Tracker, individuals in the United States have more than $195 billion in medical debt.

Medical credit accounts for a portion of this debt. From 2018, to 2020, people in the U.S. used medical credit cards or loans with deferred interest periods to pay for approximately $23 billion in health care expenses. This includes more than 17 million medical purchases from 2018 to 2020, including $1 billion in deferred interest.

What Is a Medical Credit Card?

A medical credit card is a type of credit card used only for medical expenses. Its initial purpose was to pay for procedures insurance does not cover, such as hearing exams, dental care, and cosmetic procedures. These cards have since evolved to cover additional health care charges, such as hospital treatment, per the Consumer Financial Protection Bureau.

Many companies offer medical credit cards, including Care Credit, Wells Fargo, and Simmons Visa.

Health Care Providers May Promote Medical Credit Cards

Some health care providers supply medical credit cards to their clients to finance medical payments. Once the patient signs up for one of these cards, the company pays the health care provider. The patient then becomes responsible for paying the credit card company back.

The Consumer Finance Protection Bureau warns that health care providers have incentives to encourage patients to take on medical credit.

• When a patient uses a medical credit card to pay for services, the provider receives the payment from the credit card company right away and in full.
• Since the patient has obtained credit to finance health care services, the patient may be more likely to agree to certain procedures without thoroughly researching alternatives.
• These cards reduce providers’ time and effort spent on debt collection.

In fact, several federal government agencies are teaming up to consider stricter regulations on these types of cards. The Consumer Financial Protection Bureau’s director, Rohit Chopra, is among those who expressed concern in a recent news release. “Financial firms are partnering with health care players to push products that can drive patients deep into debt,” he said.

Interest Rates

Most medical credit cards have a 0 percent interest period before the interest accrues. This deferred interest promotion period typically lasts between 12 and 18 months.

Compared to traditional credit cards, medical credit cards can have higher interest rates after the deferred period ends. Whereas traditional cards average 16 percent interest, medical cards average 26.99 percent. When cardholders make payments in installments, missing a single payment can trigger interest. Deferred interest promotions can seem attractive, but they can grow costly if you have yet to finish making payments when the promotional period ends, as the interest rates are typically higher for these cards.

Since you risk accumulating additional medical debt if you do not have the money to pay your credit card during the no-interest period, it is a good idea to consider alternatives to medical credit cards.

Alternatives for Covering Medical Bills

Before signing up for a medical credit card, review alternate options that may help you cover health care costs.

• Ask if you’re eligible for financial assistance. Under the Affordable Care Act, non-profit hospitals must provide free or discounted care.
• Some health care providers also offer payment plans. Patients can secure credit directly through lenders. These payment plans can help patients make deferred payments. However, they can also have higher interest rates that take effect after an initial no- or low-interest period.
• Most traditional credit cards can be used for medical expenses. With a standard credit card, you may earn rewards. Using a conventional credit card to pay for a health care expense could make sense if you have a low interest rate.

Consult With an Attorney

If you anticipate facing medical debt, consider working with a local, licensed attorney who can help you navigate the health care system affordably. An attorney can help you explore alternatives to taking on medical credit.