Published March 25, 2013
If you're stuck with a medical bill that's more than you can afford to repay in cash, a credit card that's designed specifically for health-care expenses may help you quickly fill the gap.
Most medical credit cards offer long-term, interest-deferred financing and you can usually get instantly approved. However, before you apply for the first card you see advertised in your medical practitioner's office, think hard about the kind of loan you are signing up for, say experts.
(See CreditCards.com's "Health-care financing comparison chart" and "Medical credit cards: Treatment today, payment headaches tomorrow")
"In any borrowing situation, you want to find the absolute best terms," says Karen Carlson, director of education at the nonprofit credit counseling agency InCharge Debt Solutions. That way, you don't wind up paying far more for a procedure than you need to.
Here are five expert tips for helping make sure you choose the best loan option for health-care financing.
1. Don't assume it's a good deal
If you're like most people, the first time you learned about a particular kind of medical credit card was probably at your doctor's office.
The receptionist may have handed you a brochure after you asked about medical financing. Or you may have noticed the brochures while waiting to be called in.
Many health-care providers -- especially those who serve patients with limited health insurance coverage, such as dentists -- partner exclusively with third-party creditors, such as CareCredit or Citibank, on special financing deals for patients.
The cards help doctors' offices get repaid quickly for services while offering patients a way to finance procedures they may not otherwise be able to pay for all at once.
However, don't be fooled by the brochure's glossy veneer -- or by the fact that your doctor's office is recommending it, say experts. Just because your health-care provider is offering a particular card doesn't mean that it's the best deal out there.
Too often, "people put blinders on and look at the advertising and the kind, loving stock photos and just assume that because it's designated as a medical credit card, it somehow has better terms than other kinds of loans," says InCharge Debt Solution's Carlson.
However, that's often not the case, she says -- especially if you can't afford to repay a card's balance by the time its promotional deal expires. "One major provider, the standard interest rate is 26.99%," says Carlson. Unless you have truly blemished credit, you can probably get a better deal with just a plain vanilla credit card.
"People hold their doctors in very high esteem, but doctors are not trained to give financial advice," she adds. "They're there to provide you with high quality medical services."
2. Read the terms
Most medical credit cards offer long-term, interest-deferred financing deals that can make signing up for the card seem like a no-brainer.
You may be able to get, for example, an interest-deferred loan on a pricey medical procedure that gives you anywhere between six and 24 months to pay it off.
But there's a catch. With a deferred-interest credit card, if you don't repay a card's balance in full by the time the promotional period expires, you may be charged the card's standard interest rate on the entire amount charged to the card -- retroactive to the date of the first purchase.
"Look at the fine print," says Mark Rukavina, founder of the health-care consulting group, Community Health Advisors. "Look long and hard to make sure if you sign up for one of these cards you're going to be able to repay according to the terms."
3. Do the math
After you've scanned the terms and conditions that are included with the application, use a loan payoff calculator to see how much you'll have to pay each month to retire the debt before the interest-free promotional period expires. You may find that the monthly payment that is needed to wipe out the balance before interest kicks in is far more than you can afford to pay, says InCharge Debt Solution's Carlson.
Don't rely on the lender to calculate your monthly payment for you, adds Jill Nussinow of Santa Rosa, Calif.
Nussinow, who has a CareCredit card, says she learned the hard way. After she began using her card, she became confused by the monthly payment that was listed on her credit card statement. Nussinow assumed that the payment CareCredit listed would add up to the full amount owed by the time the promotional period expired.
However, it turns out that was just a minimum monthly payment. "What they don't tell you when you get the card is that the payment that they ask you to make does not cover the actual payment if it were divided into equal payments for the year of free interest," says Nussinow. "Initially, I was paying the amount that they said was the payment, [and] the balance was not changing much," she says.
However, "once I spoke to someone and they explained that, I changed from making the $40-per-month payment that they say is due as the minimum payment to $150 so that it can actually get paid off."
"You should really pay attention to what it is that you're signing up for, and what it is that you're doing," Nussinow adds. "Very rarely is there a free ride."
4. Consider your options
Just because a health-care provider mentions a particular payment option doesn't mean it's the only loan available to you.
"There are many ways to borrow money," says Carlson. Research your options before you apply and see if you can find better terms with a similar interest-deferred or low-interest deal, she says.
"This advice is not unique to medical credit cards," Carlson adds. Ask yourself, 'Are these the best terms you can get? Can you afford it?' Then shop around."
Don't be afraid to ask at your doctor's office whether it offer its own extended payment plan, says Rukavina. "Communicate with the provider and see whether they have some ideas or some sort of program in place to help," he says. "Oftentimes people don't ask this and they're not made aware" of alternative payment plans.
If the health-care provider doesn't offer an extended payment plan, it still may be willing to give you a discount, says Rukavina, or recommend another program that can help. "People just should not be reluctant to ask whether there's any kind of financial assistance out there, or whether fees can be reduced, or whether the provider would be willing to negotiate an extended payment plan," he says.
5. Think back on how you've used credit in the past
You know yourself better than anyone else, says Carlson. Before you sign up for any kind of loan, look at your past behavior. Ask yourself if you are disciplined enough to repay the debt before the promotional period expires on a medical credit card.
For example, if you're the kind of person who pays off your credit card balance each month, then a deferred-interest loan may be a good option. However, if you're a minimum-payment type, a deferred-interest card can be a terrible option, says Carlson.
Health-care credit cards work best if you can afford the monthly payment during the deferred-interest period and if you are financially stable and can work within a budget, she says.
But be honest with yourself about whether that description fits how you really use credit. "Don't live in a dream world," says Carlson.