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Credit Card Debt vs. Medical Debt: Which Should You Pay off First?

Dec. 22, 2014
Credit Card Basics, Credit Cards
Credit Card Debt vs. Medical Debt: Which Should You Pay off First?
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After a medical emergency, the last thing you want to think about is paying off your medical bills and credit card debt. If you’re not sure where to start, consider a zero transfer balance credit card and some negotiation to tackle your bills.

Here’s the strategy:

Start by paying off your credit card debt.

Ultimately, ignoring your credit card debt will likely be more damaging to your finances than ignoring your medical debt. Even when medical debt comes with interest, credit card interest rates are still typically much higher. The recently released FICO 9 scoring model also ensures that medical debt in collections won’t hurt your credit as much as credit card debt in collections.

That doesn’t mean medical debt isn’t important to pay off. But if you aren’t financially able to take on both debts at the same time, it’s best to pay off the higher-interest debt first.

Look for a 0 APR balance transfer credit card.

If you have thousands of dollars in credit card debt and your interest rate is high, consider a balance transfer. With a 0 APR balance transfer credit card, you can transfer your balance and pay it off during the interest-free period.

While you’re chipping away at your credit card debt, take the time to negotiate your medical bill payments so that when you do get around to paying it off, the charges will be a little more manageable.

Look for medical billing errors.

Medical bills commonly include errors, so if you are charged thousands more than you expected, don’t assume that the charges are correct. Ask for an itemized bill and review costs one by one. If some of the medical jargon isn’t clear to you, call the provider and ask them to explain it. If you were wrongly charged for something, point it out right away and make sure it is removed from your statement.

» MORE: How to pay off debt

Negotiate and pay off your medical debt.

Use hospital price transparency tools to help you negotiate your bill with your provider. If possible, set up a zero-interest payment plan and arrange to make small monthly payments until your medical debt is paid. It’s a lot harder to negotiate old medical debt than new medical debt, so make sure to start this conversation as soon as possible. If you’re still in over your head and can’t get anywhere with your provider or insurance company, consider hiring a medical billing advocate who can take on the negotiations and communications for you.

Dealing with both medical and credit card debt can be difficult. But if you follow a strategy to pay off the debt instead of ignoring it, you’re taking the first step toward financial health – and that will help you for years to come.

Image via iStock.