Medical credit cards are financing deals, typically accompanied by a dangerous deferred interest feature, that many health care professionals offer to their patients. They are used to pay for out-of-pocket, elective health care expenses (including veterinary services) that are not covered by insurance — serving as an alternative to more traditional payment plans. However, these cards only work for certain health care expenses and with specific types of medical providers, and they cannot be used for any other types of expenses.
One could argue that medical credit cards are filling a desperate need for economically distressed consumers, considering the steep cost of health care that Americans face. But high interest rates and conflict of interest concerns regarding health care professionals steering patients toward specific financing vehicles has brought the medical credit card industry under significant scrutiny.
Consumers therefore need to tread very carefully when considering financing options for their medical procedures. The information below will help you better understand how the medical, veterinary and dental credit card markets work, whether or not you should apply for one, and how to avoid the various perils should you decide to do so.
How Medical Credit Cards Work
Much like store credit cards can only be used at the retailers whose branding they bear, medical credit cards can only be used for medical expenses — and only certain kinds, at that. These are generally expenses that are not covered by Medicaid or Medicare or are only partially covered by private insurance. Some examples of care that is and is not covered are provided below.
|Health Care-Related Expenses Payable With a Medical Credit Card|
|Dental Care & Orthodontic Procedures||Chiropractic Care|
|Cosmetic Care (including some cosmetic surgery)||Dermatology|
|Vision Care (including Lasik surgery)||Weight Loss Programs|
|Audiological Care (including hearing aids)||Hair Removal or Restoration|
|Veterinary Care||Copays & Deductibles|
|Health-Care Related Expenses NOT Payable With a Medical Credit Card|
|Continuing Medical Care||Emergency Room Visits|
|Non-Doctor-Supervised Health Care Activities (personal trainer or spa treatments)|
Medical Credit Card Comparison
|Card Name||Type of Expenses||Introductory Offer||Regular APR|
LASIK & Vision
|0% for 6-24 months, deferred interest||26.99% (V)|
Optical Health Care
Prosthetics & Orthotics
|0% for 90 days, no deferred interest||5.99% (V)|
|AccessOne MedCard||General Health Care||0% for 12–24 months, no deferred interest||9.25% (V)|
|Citi Health Card||General Health Care|
|0% for 6–24 months, deferred interest|
15.90% fixed for 24–48 months (not deferred)
|26.99% - 28.99% (V)|
|Wells Fargo Health Advantage||Wells Fargo Health Advantage Card||Dental|
Hearing Care/Hearing Aids
|0% for 6-18 months, deferred interest|
0% fixed for 24 or 36 months (not deferred)
9.99% fixed for 18–60 months (not deferred)
Pros & Cons of Medical Credit Cards
Health care expenses are the leading cause of personal bankruptcy in the U.S. and account for more collection activities than any other type of debt. Today, Americans charge about $45 billion worth of such costs to their credit cards each year, and that figure is expected to reach an estimated $150 billion by 2015, according to a McKinsey & Company report.
While it’s certainly no surprise that an alternative means of paying for medical care has become so popular, considering the current economics of the health care market, it is fair to wonder if these medical credit cards are any good. There are distinct advantages and disadvantages to using a medical credit card, as you’ll see below, and each should be weighed cautiously.
Pros of Medical Credit Cards
- Prompt Access to Funds: Medical credit cards are known for their swift application and instant approval processes, which take place conveniently at a health care professional’s office. Patients can quickly access otherwise unaffordable health care.
- Wide Applicability: Medical credit cards are widely accepted in the health care community, and the cards are also eligible to pay for a variety of different procedures. Some cards are even designed specifically for use within a network of providers.
- Pay Over Time: One of the core benefits of a medical credit card, as with any financing offer, is the ability to repay your expense as you go. This reduces the immediate financial barrier to getting a procedure done, but it also means that debt will be with you for a while.
Cons of Medical Credit Cards
- Deferred Interest: Medical credit cards usually offer a 0% or otherwise low introductory interest rate to attract new customers. This introductory rate will last between 3 and 24 months, known as a “promotional” or introductory period. If patients fail to pay their balance in full by the end of the promotional period or miss even one payment during that time, a high regular interest rate kicks in and applies retroactively to the cardholder’s entire original balance. The standard interest rate for medical credit cards is about 27% but can range from 10% to 30%. It is likely that the deferred interest feature on a medical credit card will be triggered since these cards are typically used for unaffordable procedures.
- Conflict of Interest & Lack of Competition: Many health practitioners offer medical credit cards to their patients during a visit, often right after a procedure or prior to treatment. This can lead to a patient agreeing to a medical credit card without first learning about all the associated risks or considering other options.
- Tempting for Unnecessary Procedures: Medical credit cards are offered to patients as a convenient alternative financing option. However, the cards are ultimately meant to drive more business to health care providers, some of whom have reportedly encouraged patients to pursue unnecessary procedures.
Controversy with Medical Credit Cards
Medical credit cards have come under regulatory fire for a number of issues in recent years, including extreme marketing tactics and deceptive lending practices. The following are some of the most common complaints from patients:
- Lack of Adequate Disclosures: Patients often do not receive information regarding the basic terms of medical credit cards, including a copy of the account agreement, when presented with the opportunity to apply for one.
- Poorly Timed Solicitation: The application process is often rushed. Some patients are solicited with a credit card offer before, during or after a procedure.
- Deceptive Lending Practices: Patients are often misled to assume they are signing up for an interest-free payment plan with their health care provider. They are not informed that they are signing up for a credit card that is accompanied by an underhanded deferred interest plan.
- Pushy Marketers: Some customers have complained about receiving promotional emails from their card issuers, enticing them with various potentially unnecessary medical procedures that the cards could help finance.
The Consumer Financial Protection Bureau’s December 2013 enforcement action against CareCredit, the largest issuer of medical credit cards, clearly illustrates the various abuses common in the industry. Apart from forcing CareCredit to refund $34.1 million to more than one million eligible consumers, the CFPB ordered the issuer to clean up house — including the improvement of disclosure and marketing practices as well as the enhancement of the customer experience. Hopefully these actions will discourage other lenders from taking advantage of patients in the future.
Alternatives to Medical Credit Cards
If a certain procedure or treatment requires you to pay out of pocket, explore one of the following options before signing up for a medical credit card:
- Negotiate a Payment Plan: Ask your medical provider to set up an installment plan with you. Most caregivers and hospitals will work with their patients and allow interest-free payment plans.
- Ask for Charity Care: If you have low income and are being treated at a hospital, ask if you qualify to receive Charity Care, a state-run program that requires hospital staff to provide services for free or at a reduced cost to those who meet eligibility requirements.
- Seek Public Assistance: Do some research on programs that are available in your area (e.g., dental services offered for free at many public health facilities), especially if you’re a veteran or have low income.
- Budget & Save: If you don’t need the procedure just yet, put away some of your income every month until you have enough to cover the cost. And in case you have an urgent, unforeseen expense, your savings can double as an emergency fund.
- Get a 0% Credit Card (Without Deferred Interest): If you have good credit, shop around and compare traditional 0% credit cards that allow you to spread payments over a certain period without incurring finance charges. Make sure the card doesn’t come with a deferred interest policy and use a credit card calculator to determine what monthly payments you’ll need to make in order to be debt-free by the end of your card’s introductory period.
- Seek a Medical Loan with a Lower Interest Rate: Lenders such as American Healthcare Lending and East Bridge Funding, among others, offer installment loans — not medical credit cards — designed specifically to cover health care expenses but at more affordable terms. American Healthcare Lending offers rates starting at 5.99%; there is no interest-free period. At East Bridge Funding, rates begin at 14.99%, but they also offer 0% financing for up to 18 months (with no deferred interest feature). However, East Bridge Funding loans can only be used at specific health care facilities, so make sure to carefully review the terms of any offer before signing up.
- Talk to a Credit Counselor: If you struggle with medical debt, contact a professional to help you see a clear picture of your finances and find room in your budget to cover a procedure you need. Visiting a reputable credit counselor is an inexpensive (often free) and effective option.
- Pay As You Go: Ask to be billed for each visit instead of up front for all the required visits in your treatment plan. That way, you won’t lose the money if you switch to a different provider or stop treatment halfway.
- Borrow Against Your Home Equity or 401(k): Although we strongly advise against going this route, these may be options for those in the direst situations who need money for absolutely necessary procedures. Homeowners can borrow up to 80 or 90 percent of their home equity and those with a 401(k) plan can borrow as much as 50% of their balance (up to $50,000) and pay it back over a period of up to five years.
Tips for Avoiding Medical Credit Card Mistakes
Medical credit card financing should be a last resort, if even an option to begin with. If you have a medical credit card or are considering signing up for one, follow the tips below and both you and your wallet will hopefully come out healthier in the end.
- Read the Terms Carefully: It’s imperative that you read and understand a card’s disclosure prior to signing up. Most medical credit cards claim 0% financing, but the fine print often reveals the dark side of those deals.
- Reconsider the Necessity of the Procedure: Don’t let the momentary attractiveness of a medical credit card talk you into pursuing a procedure you don’t need. If you can’t afford it now without the card and you don’t foresee being able to pay off your entire balance before the promotional period ends, your balance will trigger the deferred interest rate, costing you more for the procedure than it was worth.
- Use a Credit Card Calculator: You need to be sure that you can pay the minimum required every month as well as your full balance by the end of the introductory period for a medical credit card to do you any good. Using a credit card calculator to plan out your payments is therefore extremely important.
- Shop & Compare: You cannot evaluate a medical credit card in a vacuum. You need to compare it to other financing offers, including other medical credit cards, traditional 0% credit cards and whatever additional payment plans are available through your health care provider. Only after comparing all your options can you find the best deal.
- Assert Your Rights: If you experience any problems with your medical credit card, you should submit a complaint to the Consumer Financial Protection Bureau. They won’t be able to intervene with your lender, but the agency will ultimately exercise its regulatory power if it receives enough similar complaints.