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What Is a Medical Credit Card?

You've just had an emergency root canal and don't have dental insurance to help you cover the cost. While Novocaine is dulling your dental pain, the discomfort of not knowing how you'll pay for this procedure feels intense.Your dentist's office suggests you apply for a medical credit card to pay off your bill, but how do these cards work? Should you apply for one right now?

A medical credit card is one that can only be used to pay for eligible medical, dental, health care or veterinary expenses. If you're approved, a medical credit card can indeed help you finance health care expenses that insurance—and your savings account—don't cover. Whether it's the right financial tool to help you get out of medical debt depends on a variety of factors.

How Do Medical Credit Cards Work?

Medical credit cards differ from traditional credit cards in a few significant ways. For starters, only participating health care providers accept them. Medical credit cards also can't be used for every procedure. Before you consider applying for a medical credit card, make sure the card will work for your provider and the procedure you need.

Medical credit cards aren't all the same. Offers will vary by company and by your credit score and history. CareCredit, Wells Fargo Health Advantage and AccessOne MedCard are three common options, and you're likely to encounter them while you're in your provider's office. The options you find may include the following:

  • Introductory 0% interest financing: It's important to pay your balance off on time and in full to avoid high interest charges (more on this later). These accounts typically convert to a relatively high interest rate once the introductory period ends. If a card offers deferred interest, you'll only avoid paying interest if you pay off your balance in full by time interest kicks in.
  • Longer-term financing: This comes with a reduced interest rate and regular monthly installments.
  • A mid-range interest rate on revolving credit: This works like a regular credit card, but for selected expenses only.

Pros and Cons of Medical Credit Cards

Are medical credit cards a good deal? Here's a quick breakdown of the pros and cons:

The Pros

  • Quick access to available credit if your current credit options won't cover your medical bills.
  • Zero-interest financing, if you can pay off your balance within the introductory period.
  • Medical debt is isolated to a specific account, making it easier for you to track your medical expenses and pay off your bills in a targeted manner.

The Cons

  • It might be difficult to pay off your balance by the time a deferred-interest period ends. When this happens, you may be charged interest retroactively for the deferral period. Late payment penalties can also be high—and a late payment may cause your introductory period to end early.
  • You may be worse off with a medical credit card than a general-purpose credit card. If you're eligible, you can find traditional credit cards with perks including:
  • You may be tempted to apply for and accept this financing without reading the fine print because it's recommended by your provider. There's nothing inherently wrong with medical credit cards but, as with any credit, you should weigh all the facts and make a careful decision.

How Medical Credit Cards Affect Your Credit

Before you apply for a medical credit card and put your balance on it, take a moment to understand how medical debt affects your credit. Medical debt doesn't appear on your credit report like other types of debt do. That is, unless, you become significantly past due on your medical debt payment and your account is transferred to a debt collector. Once you put medical expenses on a medical credit card, however, it's likely to become regular credit card debt, at least from the perspective of your credit report.

Also, different cards impact your credit differently. Some card programs say they accept all patients, regardless of credit, and never report to credit bureaus. Others operate more like regular credit cards: They require a credit application and credit check. Once approved, your credit line becomes part of your available revolving credit and any charges you make on your card count toward your credit utilization ratio. On-time payments, as well as late payments and defaults are reported, just as they would be on any other credit card accounts.

In every case, it's important to understand the following: What does the credit application process require? How will your credit score and report affect your offer? How will information about your account be reported to credit bureaus?

Alternative Ways to Pay for Medical Debt

Finally, ask yourself whether a medical credit card is the best way to pay off your medical debt. Here are a few options that might make more financial sense:

Negotiate direct payments. Talk to your provider before you finance your medical bill. They may be willing to reduce or eliminate charges up front. They may also work out a plan for you to pay them back directly, possibly with low or no interest attached.

Seek financial assistance. Many providers—especially hospitals—have financial assistance programs for patients with qualifying incomes. There may also be programs in your community to help people in need.

Save up and pay cash. Although this won't work for emergency or urgent treatment, it's worth considering for elective procedures.

Use a traditional credit card. Check the rates and any promotional offers on your existing cards—and shop for new credit cards with 0% interest promotions or competitive interest rates. You may beat any deal you can get from a medical credit card.

Consider a personal loan. A personal loan enables you to pay off medical debt in regular installments over time, with interest rates that may be lower than what you'd pay on your credit card. You can browse personal loans that match up with your credit score using Experian CreditMatch™.

Finding Your Best Option

A medical credit card can be a viable alternative for paying off medical expenses. Just make sure you first understand rates, terms and the impact on your credit—as well as taking the time to determine whether a new medical credit card is in fact your best, most painless option. If you're in a position where credit is needed to help you cover your medical costs, first be sure to understand your credit situation so you can better focus your efforts. Whether that means improving your scores or applying for debt you can qualify for, checking your credit report and score is usually a wise first step.