The Hidden Dangers of Medical Credit Cards

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Understanding Medical Credit Cards: Risks and Alternatives

At O1ne Mortgage, we prioritize consumer education on credit and finance. This post aims to provide an objective view to help you make the best decisions regarding medical credit cards. For any mortgage service needs, call us at 213-732-3074.

What Is a Medical Credit Card?

A medical credit card is a specialized credit card used exclusively for health care expenses, such as hospital stays, dental care, or cosmetic surgery. These cards are often promoted by health care providers and can be applied for at the provider’s office or online. Some medical credit cards are limited to specific networks or types of health care providers.

Like other credit cards, medical credit cards offer revolving credit up to a certain limit, which can vary based on the card, provider, and type of medical care. Factors such as your income, debt-to-income ratio (DTI), credit history, and score also influence your credit limit. These cards typically offer a low or 0% introductory annual percentage rate (APR) for a limited time, but the standard purchase APR applies once the promotional period ends.

Risks of Using a Medical Credit Card

While medical credit cards can be convenient for health care providers, they may not be the best option for consumers. Here are some risks to consider:

High APR

Medical credit cards generally have higher APRs than standard credit cards. For example, in May 2023, the average credit card APR was 22.16%, while the average medical credit card APR was 26.99%, according to the Consumer Finance Protection Bureau (CFPB).

Deferred Interest

A 0% introductory APR may sound appealing, but medical credit cards often charge deferred interest. If you haven’t paid off the card by the end of the promotional period, 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, it isn’t reported to credit bureaus unless it goes to collections. However, paying medical bills with a medical credit card converts the debt into credit card debt, which can negatively impact your credit score if payments are late.

Alternatives to Using a Medical Credit Card

Instead of using a medical credit card, consider these alternatives:

Ask to Be Billed

Request to be billed for your treatment and sort out the costs later. This gives you time to figure out how to pay the bill without losing special protections for medical debt.

Negotiate with Your Health Care Provider

Ask for a reduced rate or an income-driven payment plan. Some providers offer hardship plans based on your income, and nonprofit hospitals are required by law to provide financial assistance for low-income patients.

Consider a Personal Loan

Personal loans from banks, credit unions, and online marketplaces generally have lower APRs than medical credit cards. Use the loan to pay off your medical debt and repay it in fixed monthly installments.

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. This can be a more cost-effective option than a medical credit card.

The Bottom Line

While medical credit cards may seem like a convenient solution, they can pose significant risks to your financial health. When faced with a large medical bill, take the time to explore all your payment options. For any mortgage service needs, call O1ne Mortgage at 213-732-3074.

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