If you require medical services that aren’t covered by your insurance or if your insurance provider doesn’t cover the total cost, your medical service provider may introduce a medical credit card as a solution. Medical credit cards can be used to cover Lasik or other vision procedures, cosmetic surgery, dental work, veterinary services, or other expensive procedures that you can’t cover out of pocket.
Typical Repayment and Promotional Terms
Medical credit cards aren’t major credit cards so they can only be used to cover medical services and only when the service provider accepts that particular payment method. Repayment terms are typically short, ranging from 6 to 36 months. However, some medical credit cards offer repayment periods for as much as 60 months for more expensive procedures.
Many of the products offer a deferred-interest deal where you can avoid interest if you pay in full before the promotional period ends, but the interest on the full balance (from the initial transaction) kicks in if you don’t pay in full. Late payment penalties are stiff – if you miss just one payment, you’ll not only incur a late payment fee but you’ll also lose your promotional interest rate; interest will kick in immediately.
Medical debt is such a problem in the United States that it’s been cited as the number one cause of bankruptcy – and that’s for medical debts that are billed directly to patients. Putting medical services on a credit card can make the situation worse, especially if you're already struggling to pay the bills you have.
Common Complaints of Medical Credit Cards
A common problem with medical credit cards is that they are promoted by medical staff that are not trained to promote credit cards or verse in the terms and conditions about the credit cards. Too often, patients are left without the cost information they need to make an informed decision.
And since medical staff promote the credit card directly, patients may believe they’re signing up for an in-house payment plan with the medical office rather than opening up a new credit card account, a fact that may have led the patient to turn down the offer.
Medical service providers are paid within a few days of the transaction, regardless of whether they’ve performed the services yet or not. This presents a problem because consumers often can’t get a refund if they elect not to get the services.
Trouble With the Medical Credit Card Industry's Biggest Card
CareCredit offered by GE Capital is the industry’s largest medical credit cards. While the APR is a high 26.99%, CareCredit offers a deferred-interest period, meaning you can avoid paying any interest at all if you pay your balance in full before the promotional period ends.
Deferred-interest isn’t such a bad proposition, when the consumer understand that’s what they’re signing up for. However, hundreds of CareCredit cardholders complained to the Consumer Financial Protection Bureau about CareCredit’s deceptive terms, especially the deferred-interest plan, or rather how it was poorly explained.
Consumers say CareCredit was marketed to them under a promotional interest rate – no interest paid for a period of 6 to 24 months. However, it wasn’t completely explained that the deal was for a deferred-interest period, meaning the card was only interest-free if the balance was paid in full during the promotional period. If the balance was not completely repaid during the promotional period, accrued interest from the date of the initial transaction would be added to the balance.
A press release from New York’s Attorney General stated that about 25% of CareCredit cardholders who choose the deferred-interest plan end up paying interest once the promotional period ends.
The New York Attorney General reached an agreement with CareCredit in 2013 to refund interest to some cardholders and to change its practices to further protect consumers. Among these practices, CareCredit cannot charge customers for services that haven’t been performed, the company has to be clearer about the deferred interest program, give better training to providers, and improve their complaint and dispute resolution practices. However, New York’s Attorney General’s jurisdiction does not extend outside of the state.
In late 2013, the Consumer Financial Protection Bureau required the GECapital to refund up to $34.1 million of interest payments to consumers who were not given a proper explanation of the deferred interest terms. The CFPB’s new requirements for CareCredit are similar to those brought by New York Attorney General. Though not as strict, these practices extend to consumers all over the country, not just those in the state of New York.
Options for Financing for Medical Procedures
If you have to put your medical procedure on plastic, you don’t have to use the credit card presented by the medical office staff. You can use a credit card you already have as long as you have enough available credit. While you may end up paying interest on the balance, you also give up the risk of being charged retroactive interest or losing your promotional rate because of a missed payment.
A medical credit card may sound attractive if you have no other options. CareCredit is the industry’s largest medical credit card, but not the only one. So be wary of any financing offer presented to you by your medical service provider. Make sure you understand the terms completely, particularly any interest-free promotions. Pay off the balance as quickly as possible to reduce the interest you pay and to ensure you pay within the deferred-interest timeframe, if there is one.