At O1ne Mortgage, we prioritize your financial well-being and aim to provide you with the best advice for managing your finances. In this article, we will explore the concept of medical credit cards, the risks associated with them, and better alternatives for handling medical debt. If you have any mortgage service needs, feel free to call us at 213-732-3074.

What Is a Medical Credit Card?

A medical credit card is a specialized credit card designed to cover health care expenses such as hospital stays, dental care, or cosmetic surgery. These cards are often promoted by health care providers as a convenient payment option. You can apply for a medical credit card at your provider’s office or online, and approval is usually quick.

Medical credit cards function similarly to regular credit cards, offering revolving credit up to a certain limit. As you pay down your balance, the available credit replenishes. The credit limit depends on various factors, including your income, debt-to-income ratio (DTI), credit history, and credit score.

These cards often come with a low or 0% introductory annual percentage rate (APR) for a limited period. If you repay the balance within this period, you avoid interest charges. However, once the promotional period ends, the standard purchase APR applies, which can vary significantly.

Risks of Using a Medical Credit Card

While medical credit cards may seem like a convenient solution, they come with several risks that you should consider:

High APR

Medical credit cards generally have higher APRs compared to standard credit cards. For instance, the average medical credit card APR is around 26.99%, which is significantly higher than the average credit card APR of 22.16%.

Deferred Interest

A 0% introductory APR might sound appealing, but medical credit cards often charge deferred interest. If you don’t pay off the balance before the promotional period ends, you’ll be charged interest on the entire amount financed, not just the remaining 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 it goes to collections. However, paying medical bills with a medical credit card converts it into credit card debt, which can negatively impact your credit score if payments are late.

Additionally, once you’ve paid a medical bill with a credit card, it becomes challenging to negotiate the bill down or receive financial assistance. Concerns about these downsides have led federal agencies to investigate medical credit card practices to ensure adequate consumer protections.

Alternatives to Using a Medical Credit Card

Instead of relying on a medical credit card, consider these alternatives for managing medical debt:

Request Billing and Negotiate

Ask your health care provider to bill you for the treatment, giving you time to explore payment options. You can also negotiate for a reduced rate, especially if you pay out of pocket instead of using health insurance.

Income-Driven Payment Plans

Many health care providers offer hardship plans that base your monthly payments on your income. In some cases, providers may even reduce the total amount owed. Ensure that the payment plan agreement is directly with the health care provider and not a third-party medical credit card or loan.

Seek Financial Assistance

Nonprofit hospitals are legally required to provide financial assistance for low-income patients. Other providers may offer charity care as well. You may also qualify for assistance from Medicaid, local nonprofits, religious organizations, and state programs.

Consider a Personal Loan

Personal loans from banks, credit unions, and online marketplaces generally have lower APRs than medical credit cards. Use a personal loan to pay off your medical debt and repay the loan in fixed monthly installments. Avoid loans secured by your home to prevent the risk of losing it if you can’t make 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. This can help you manage medical debt without incurring high-interest charges. Ensure there is no retroactive deferred interest by checking the card agreement.

The Bottom Line

While medical credit cards may seem like a quick fix, they can pose significant risks to your financial health. When faced with a large medical bill, take the time to explore all available payment options. If you need expert advice on managing your finances or mortgage services, contact O1ne Mortgage at 213-732-3074. Our team is here to help you make the best financial decisions.