How to Save Money and Avoid Medical Credit Cards
Medical credit cards can be a helpful way to finance healthcare expenses, but they should always be avoided unless necessary. They often deceive consumers and cost them more money than necessary in the long run.
In 2013, the Consumer Financial Protection Bureau fined CareCredit $34.1 million for deceptive card enrollment tactics that concealed its deferred interest offer. Furthermore, they were ordered to improve their disclosure and marketing practices.
What are medical credit cards?
Whether you’re visiting your doctor for routine checkups or facing an unexpected medical crisis, healthcare costs can quickly add up. Fortunately, there are ways to save money and avoid medical credit cards.
Medical credit cards offer tempting financing options but are expensive and should only be used when necessary. Unfortunately, they may not be suitable for everyone.
Finding the ideal credit card for medical expenses requires doing some research. Compare each card’s interest rates and fees against your budget and financial objectives.
If you want a card with zero interest, ensure you can pay off the balance in full during its introductory period. Otherwise, you could face high interest charges later, potentially increasing out-of-pocket expenses.
Additionally, it’s essential to comprehend how long it will take you to pay off a medical procedure once the card converts to an ordinary interest rate. You also need to know how long the debt must be repaid and any additional fees or payment schedules that may apply.
Another factor to consider is whether or not you must pay any late fees or administrative charges. Furthermore, check if the health care provider accepts credit cards or requires you to sign up for a payment plan, which could incur additional fees.
Finally, if you’re considering getting a credit card to cover medical expenses, remember that it could impact your credit score. Furthermore, there will be an associated fee, and you must be able to afford the minimum monthly payments.
If you can afford to pay your medical credit card bill in cash, getting one may not be necessary. Other alternatives will save money and keep debt from negatively affecting your credit score, such as financial assistance programs offered through hospitals and other providers, plus tax-deferred retirement savings plans.
What are they used for?
Medical credit cards may seem like an attractive solution if you need to pay for a medical procedure that your insurance won’t cover. However, these cards aren’t always the most efficient way to finance healthcare costs.
Medical credit cards differ from general ones because specific healthcare providers can only use them. Furthermore, they require full payment each time you purchase – making them more challenging to use than regular cards.
CareCredit is the go-to medical credit card, offering no-interest financing on medical procedures for six months or longer. However, be wary – if you are not careful, you could owe a substantial interest after the promotional period ends.
Avoid Cards With Deferred Interest: Most medical credit cards have a deferred interest policy. If you don’t pay off your balance in total during the promotional period, you will be charged an excessive interest rate on the total charges from whence the deferral began.
An alternative to a medical credit card is a regular credit card with an extended 0% interest introductory period and low ongoing APR. A credit card with such a rate may even be more accessible to manage than a medical card if you already have access to personal loans or other lines of credit that let you pay off the balance faster.
Consider Opening a Flexible Spending Account or Health Savings Account: Many employers provide flexible spending (FSA) or health savings accounts (HSA). These accounts allow you to set aside pre-tax money for eligible medical expenses.
These accounts can be linked to a debit card, an electronic bank, or a credit union debit card that allows you to access funds in these accounts without paying a fee. Check your employer’s policies before using this card to ensure adequate coverage.
Medical credit cards often come with significant fees and higher interest rates than other forms of credit, making them not always the best option for paying off medical bills. Furthermore, opening a medical credit card may cause your credit score to decrease by up to five points; thus, be mindful that opening one could lower your score by five points or more.
Pros
If you have high out-of-pocket medical expenses, a medical credit card can help you pay them off quickly and save money on interest by spreading payments over time.
Before applying for one, be aware of the potential drawbacks. Medical credit cards do not build credit like general-use cards and tend to report negative behavior to credit bureaus more often than other cards do. Furthermore, you could lose your promotional 0% interest rate after making one late payment; additionally, if you don’t pay off the entire balance within the introductory period, high interest will apply.
The CareCredit card, for instance, is a medical-specific credit card accepted by hundreds of thousands of healthcare providers throughout the U.S. It covers traditional insurance copayments and elective medical procedures not covered by health plans. Developed by Synchrony Financial Services – one of the nation’s largest providers of private-label credit cards – this card has become one of the go-to solutions for consumers looking for medical payment solutions.
Another viable option is a HELOC (home equity line of credit), which can provide quick access to cash when needed. Unfortunately, these loans are secured and typically come with variable interest rates.
Some medical credit cards are issued by financial services companies, while most are distributed directly to doctors. Not only do these cards assist patients with paying their healthcare bills, but they can also reduce stress for doctors by offering an immediate means to receive and process payments.
Pros:
“Medical credit cards offer an immediate solution for people who require immediate payment for medical services,” according to Alan Tebby, a chiropractor in Charlotte, N.C. He notes that many patients who used to put off treatment due to financial concerns now use these cards to get the care they require right away.
Some cards offer deferred interest options, allowing you to pay down the balance over a set number of months without paying it back. You must read all details carefully to ensure you don’t end up with an offer that charges back interest if you don’t complete payment during its introductory period.
Cons
Paying for a medical procedure can be an unexpected and overwhelming financial strain. Fortunately, there are ways to minimize its effect financially, including bargaining with providers for discounts and seeing if your employer provides any reimbursement arrangements or health reimbursement accounts.
Despite these options, some patients still require credit cards to cover their bills. Medical credit cards can be helpful but should only be utilized when necessary.
They can come with some significant drawbacks, however. Aside from the obvious disadvantage of incurring a high interest rate, credit cards can also potentially affect your credit score negatively. Fortunately, if you take time to read all details carefully, there are many steps you can take to avoid these card sins.
First and foremost, be aware that many medical credit cards offer 0% interest for an extended period. These introductory rates can be tempting for consumers with average or better credit scores.
But you could face retroactive interest charges if you don’t make the required payments during this introductory period. This should be your top priority when choosing a medical credit card.
In the long run, paying your medical expenses in cash or through an employee benefit may be more cost-effective. Alternatively, you could apply for a regular credit card with a low-interest rate or rewards program.
Avoid becoming overwhelmed with high-interest medical debt. It cannot beunsafe to sort through all your options and decide which best meets your requirements.
Take the time to do your research and weigh your options carefully before paying for any medical procedures. Follow these guidelines, and you’ll be on your way to achieving a more secure financial future.
