Medical Credit Cards: The Good, The Bad, And The Ugly

Your in the Dentist’s chair, you just learned that you need a Root Canal, and you have no Dental Insurance.

Karl Malden

To quote the late Karl Malden:  “What Will You Do????? WHAT WILL YOU DO????”

One solution being used more and more is the Medical Credit Card.

Medical Credit Cards have been in use for some time now, originally being used for elective procedures such as cosmetic surgery which was not covered by insurance.

However, the use of these cards is increasing for necessary medical procedures by individuals that are either uninsured or underinsured, and Obamacare does little to address insurance for dental expenses.

The Good!

Yes, there is some good to these cards.

Most medical credit providers offer interest free periods of from 6 -18 months.

So, if you are the type of person that is good at managing their credit, you don’t have medical insurance, need a necessary medical or dental procedure, and the only other alternative is an interest bearing credit card, then this type of credit may be for you.

The Bad!

Pain is a great motivator, and also a great selling tool.

The temptation to use medical credit to make the pain go away quickly could prevent someone from looking for services at a more affordable rate.

With medical credit, health care provider gets paid in full, so there is little or no incentive for the doctor or hospital to offer to provide the services at a cash pay rate or to work out some type of payment over time arrangements.

Further, even though most of this credit is offered with an interest free period:

• The interest free period will end if a payment is missed;
• The interest is often in excess of 30%; and,
• In many cases, if any amount is due on the balance at the time of the grace period, all of the interest on the full amount borrowed comes due, not just interest on the balance.

The Ugly!

As recently reported in The New York Times article “Patients Mired in Costly Credit From Doctors”:

• This type of credit is often used by the elderly who are already on a fixed income and may not have the means to pay another bill;
• Medical Credit is usually issued without obtaining a credit report, so the credit worthiness of the consumer does come into the loan process.  This can result in a person who already has debt problems incurring more debt than they can pay.
• Lawsuits have been filed by State Attorney Generals as well as individual and class action lawsuits alleging that patients have been misled about the terms and conditions of these loans.

Like any type of credit, it is a good idea to look at all other options before incurring debt for health care.