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How do you handle a hefty medical bill? Increasingly, consumers are turning to medical credit cards. These specialty credit cards are designed and marketed as a way to finance health care costs, but using one is rarely the best option. If you're considering a medical credit card, be sure to understand the risks and what some better alternatives may be.
What Is a Medical Credit Card?
A medical credit card is a credit card that can only be used to pay for health care, such as a hospital stay, dental care or cosmetic surgery. Your health care provider may promote medical credit cards as a payment option; you can generally apply at your provider's office and get approved right away. You can also apply for medical credit cards online.
Some medical credit cards only work for providers within a certain network or for certain types of health care providers, such as dentists, dermatologists and plastic surgeons.
Like other credit cards, medical credit cards are revolving credit you can use to pay for medical care up to your credit limit. As you pay down your balance, credit becomes available to use again. Credit limits can vary depending on the card, the provider and the type of medical care. Your income, debt-to-income ratio (DTI), credit history and score also affect your credit limit.
Medical credit cards typically offer a low or 0% introductory annual percentage rate (APR) for a limited time. If you repay your balance during that time, you'll incur no interest. When the promotional period ends, the standard purchase APR applies. Medical credit card APRs vary.
Risks of Using a Medical Credit Card
Health care providers have embraced medical credit cards. When patients use credit cards, medical offices get paid right away without the hassle of insurance claims, sending out bills and following up to collect payment. But while medical credit cards may be a cure for what ails medical offices, they generally aren't the best way for consumers to pay medical debt. Consider them only after exhausting all other options, and keep these risks in mind:
Medical credit cards generally have higher APRs than standard credit cards. In May 2023, the average credit card APR was 22.16%; meanwhile, the average medical credit card APR is 26.99%, according to the Consumer Finance Protection Bureau (CFPB).
When you apply for regular credit cards, a higher credit score can help you qualify for a lower APR. But most medical credit cards don't take credit scores into consideration; you'll pay the same whether your credit is poor or excellent.
A 0% introductory APR sounds appealing. However, medical credit cards typically charge deferred interest. If you haven't paid the card off when your promotional APR ends, you're charged interest on the entire amount financed—not just the outstanding balance.
Potential Harm to Your Credit
Medical debt is treated differently from other types of debt. Generally, medical debt isn't reported to credit bureaus unless your account goes to collections, which can occur after your account is considered past due for 60, 90 or even 120 days. Even then, credit bureaus give you 365 days to resolve the issue before the unpaid debt shows up on your credit history. Medical bills under $500 never appear on your credit report at all. The newer credit scoring models FICO® Score☉ 9 and VantageScore® 3.0 and 4.0 also weigh medical collections less heavily than other collection accounts.
Paying medical bills with a medical credit card eliminates these accommodations. When you use a medical credit card to pay medical debt, it's then considered credit card debt, which has a greater potential to hurt your credit. When a credit card payment is 30 days late, for instance, a delinquent payment appears on your credit report and can have an immediate negative impact on your credit score.
Once you've paid a medical bill with a credit card, it can also be difficult to negotiate the bill down or to receive financial assistance that you're entitled to. Concerns about the potential downsides of medical credit cards have spurred several federal agencies to gather information about medical credit card practices to explore whether adequate protections exist for consumers using these cards.
Alternatives to Using a Medical Credit Card
Instead of using a medical credit card to pay for medical care, try these options.
- Ask to be billed for your treatment and sort out the costs later. This buys you some time to figure out how you'll pay the bill without forfeiting the special protections for medical debt.
- Negotiate with your health care provider. Ask your health care provider for a reduced rate. This works best if you pay out of pocket instead of using health insurance. Spreading payments over time can be easier on your budget than paying a lump sum.
- Ask about income-driven payment plans. Health care providers may offer hardship plans that base your monthly payments on your income. In some cases, providers may even reduce the total you owe. Just make sure the payment plan agreement is with the health care provider itself; medical practices sometimes present "payment plans" that are actually third-party medical credit cards or medical loans.
- Seek financial assistance. Nonprofit hospitals are required by law to provide financial assistance (or charity care) for low-income patients. Other providers may offer charity care too. You may also qualify for financial assistance from Medicaid, local nonprofits, religious organizations and local or state programs.
If you use these approaches and still have a sizable bill:
- Consider a personal loan. Available from banks, credit unions and online marketplaces, personal loans generally have lower APRs than medical credit cards. (As of May 2023, the average APR for a 24-month personal loan was 11.48%, according to the Federal Reserve.) Use the personal loan to pay off your medical debt, then repay the loan, generally in fixed monthly installments. Avoid loans secured by your home, or you risk losing it if you can't make the payments.
- Apply for a low- or zero-interest credit card. If you have good to excellent credit, you may qualify for a new credit card with an introductory 0% APR for a limited time, typically 12 to 21 months. If you have a balance when the promotional period ends, it accrues interest at the card's standard APR going forward—but there's generally no retroactive deferred interest to worry about. (Check the card agreement to confirm.) If the card's standard APR is lower than that of a medical credit card, you'll save even more on interest.
The Bottom Line
While medical credit cards may seem like a cure-all, they can pose major risks to your financial health. Next time you get a big medical bill, remain calm and take time to explore your payment options.
Concerned that an unpaid medical bill could be hurting your credit score? Sign up for free credit monitoring from Experian to keep tabs on your credit report and gain peace of mind.