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Medical Credit Cards: Know the Risks

Nov. 21, 2013
Credit Cards
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Facing a serious medical crisis is a stressful situation for anyone to have to cope with, but dealing with a health-related issue when you’re lacking adequate health insurance is even more difficult. Owing to the fact so many Americans face this very situation every year, credit card companies have recognized an opportunity to drum up more business. Recently, banks have begun offering medical credit cards, a special type of plastic that allows customers to pay for health care-related expenses.

On the surface, these cards seem to be a godsend for cash-strapped patients; in most cases, customers aren’t charged an interest for their “purchase” for two years, terms that are much more generous than typical credit cards. But if you dig a little deeper, it becomes clear that there’s more to medical credit cards than meets the eye.

If you’re considering paying for a procedure with a medical credit card, be sure to carefully review the information below – it could save you from making a costly mistake.

Interest-Free Borrowing – For A While

One of the main benefits that medical credit cards offer is a fairly long interest-free period. In most cases, the patient establishes the credit card’s repayment schedule with her practitioner prior to obtaining the card, and these plans usually allow patients an interest-free period of up to 24 months. If the patient and her physician agree that paying for the treatment will take longer than two years, an interest rate of around 15% is charged after the initial 24 months is up.

Although interest charges may eventually kick in, two years is a much longer interest-free period than those offered by other credit cards. Again, this is the main advantage that medical credit cards have over similar products. However, it’s important stick to the repayment terms very carefully, or this perk will become moot (see below).

Strict Repayment Terms

One of the main complaints leveled against medical credit cards is the extremely strict repayment terms they require their customers to follow. For example, missing just one payment could cause interest charges to kick in, even if the customer is still in her interest-free period. What’s worse is that interest will be charged on the whole balance, not just the monthly payment. Also, medical credit card issuers are notoriously resistant to negotiating – this means that if you try to get them to throw you a bone after one missed payment, you likely won’t have any luck.

All this means that if you want to capitalize on the interest-free period offered by medical credit cards, be sure to take special care to make your payments on-time and in full.

Stellar Credit Isn’t Required

Most medical credit cards don’t require borrowers to have outstanding credit in order to qualify for the card. While this might seem like a good quality, it’s important to remember that if your credit isn’t great, you’ll likely have to pay a higher interest rate. In fact, many consumer advocates are concerned that medical credit card companies are guilty of preying on patients with poor credit who have few options for borrowing money.

If you have average credit and are interested in obtaining a medical credit card, just be sure you’re fully aware of the APR you’ll be paying once your interest-free period is up – if it seems exorbitant, look into other alternatives.

Virtually No Refunds

One of the worst things about medical credit cards is that obtaining a refund once you’ve already paid for a service is nearly impossible. While it may seem unlikely that you’ll need to “return” a medical procedure, consider a condition that may require multiple treatments. If you doctor estimates that five treatments is necessary and you pay for them all up-front, you won’t be reimbursed if you only end up needing three.

Lower-Cost Options May Be Out There

Before signing on to a medical credit card, consider other options that might be out there. For example, if you have a very low income, you may be able to use your state’s Medicaid program to pay for your treatments. Alternatively, if your credit is very good, you might be able to find a conventional credit card that offers more flexible terms than a medical credit card. Don’t let your haste to figure out a solution to paying for a necessary medical treatment cause you to make a rash decision – explore all your choices before committing.

The takeaway: Medical credit cards might be the right choice for you if you’re very good about sticking to repayment plans, but be sure to you have the facts about these cards straight before signing onto one. Use the information above to make an informed decision about paying for your medical care – after all, there’s nothing more painful than getting ripped off!