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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 informed decisions regarding medical credit cards. For any mortgage-related needs, feel free to call us at 213-732-3074.

What Is a Medical Credit Card?

A medical credit card is designed specifically 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 cards are limited to certain networks or types of providers, like dentists or plastic surgeons.

Medical credit cards function like other credit cards, offering revolving credit up to a specified limit. Your credit limit is influenced by factors such as your income, debt-to-income ratio, credit history, and score. These cards often come with a low or 0% introductory APR for a limited time, but once the promotional period ends, the standard APR applies.

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 compared to standard credit cards. For example, the average medical credit card APR is 26.99%, which is higher than the average credit card APR of 22.16% as of May 2023.

Deferred Interest

A 0% introductory APR may 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, 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:

Negotiate with Your Health Care Provider

Ask for a reduced rate or an income-driven payment plan. Some providers may offer hardship plans based on your income, or even reduce the total amount owed.

Seek Financial Assistance

Nonprofit hospitals are required to provide financial assistance for low-income patients. Other providers may offer charity care, and you may also qualify for assistance from Medicaid, local nonprofits, or state programs.

Consider a Personal Loan

Personal loans from banks, credit unions, or 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 compared to medical credit cards.

The Bottom Line

While medical credit cards may seem like a quick fix, they come with significant risks. Take the time to explore all your payment options before committing to a medical credit card. For any mortgage-related inquiries, call O1ne Mortgage at 213-732-3074.

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