Editorial Policy

5 ways medical credit cards can trip you up

Allie Johnson

September 10, 2014

A medical credit card can offer a quick way to pay for treatment when you lack cash — but experts say this type of plastic can be bad for your financial health.

Medical credit cards are designed specifically to pay for health expenses — from cosmetic surgery to dental work or even vet care for the family pet — and typically are marketed in doctor, dentist and veterinary offices.

When her husband broke a crown on his tooth, Texas resident Lorraine Milton says her family used CareCredit, a medical card from Synchrony Bank, to pay about half of the $2,000 bill, which was partly covered by insurance. Milton says she paid quadruple the minimum payments of $25 to get the balance paid off during a zero-percent promotional period. “It's a good option in a pinch,” Milton says.

But, you should educate yourself before you sign on the dotted line. Here are five things you should know about medical credit cards:

1. A hasty decision can hurt you. If you or a family member needs care urgently, it can be tempting to get a card quickly, but read all paperwork to understand the terms and conditions. In 2013, the Consumer Financial Protection Bureau (CFPB) ordered CareCredit to refund over $34 million to consumers because of “deceptive enrollment practices” that included not properly disclosing product details. Now, the CFPB requires CareCredit to provide clearer information to consumers and to enroll all consumers borrowing more than $1,000 by phone through a CareCredit representative. That requirement will help ensure that those consumers receive the required disclosures,  says Chi Chi Wu, staff attorney for the National Consumer Law Center. Consumers typically sign up for medical credit cards in doctor and dentist offices, where office staff tell them about the products and provide applications. This has caused problems: For example, some medical office employees selling CareCredit did not provide written information about terms and conditions or even fully understand the products, according to the CFPB.

2. You could get a better deal through your health care provider. If you ask, your doctor, dentist or vet might be able to get you a longer introductory period or a better interest rate on a medical credit card, says Ruth Susswein, deputy director of national priorities for Consumer Action, who led a 2014 survey of medical credit cards. On its website, CareCredit tells medical providers it offers a variety of financing options, including zero-percent promotional periods of six, 12 or 18 months. In some cases, the provider has some leeway, Susswein says. However, not every provider is necessarily going to be willing or able to negotiate, she says: “But, you have nothing to lose by asking.”

An alternative: Ask your health care provider if it would provide a payment plan without charging interest, Consumer Action recommends.

“Some medical practices and dental offices offer payment plans but don't advertise it,” Susswein says.

3. You may be paying before the service is completed. Traditionally, a patient pays when services are rendered or gets billed later. But with medical cards, the patient might be billed in full before a service is completed, Susswein says. For example, she says, a patient might pay for a dental implant that's being done over three visits, but decide after the first visit that she's not happy with the dentist's work. “This can be problematic,” Susswein says, when the entire cost of services has already been charged to a medical credit card.

4. It could be tough to win a chargeback. When you buy an item and it's not as described or it never arrives, you can file a chargeback with your card issuer, which typically will issue a temporary refund, then investigate.  If you win, the refund becomes permanent. But being unhappy with a medical service is very different from being dissatisfied with a particular product, and that can make it hard for a patient to win a chargeback, Susswein says. “It can be a pretty murky area,” she says. There's an added layer of complexity with medical cards because the provider is both the merchant that sold you the service and the issuer's customer — and possibly a more valued customer than you, Susswein says. “The issuer tends to do repeat business with this medical office and wants to be sure they're a happy customer.”

5. You could get hit with sky-high interest on the entire balance. You might be better off paying that medical bill with a regular card, experts say. Some medical cards, including CareCredit, have deferred interest deals. That means that interest accrues during a zero-percent introductory period, but you can escape paying interest only if you follow the terms to the letter and pay off the entire balance before the promotional period ends, Wu says. If you make a late payment, miss a payment or still have a balance — even a small one — when the intro period ends, it may cost you, Wu says. “You could end up getting socked with interest on the entire amount,” she says. And it probably won't be low interest: The Consumer Action survey found medical card APRs as high as 28.99 percent. “That's not a good deal for anyone,” Susswein says.

Wells Fargo spokeswoman Natalie Brown says medical cards help consumers. “This card is about choice — giving people financing options for things their health insurance doesn't cover,” she says of Wells Fargo's Health Advantage card. In fact, one card option the bank offers carries an APR of 9.99 percent. Consumers could use a traditional card, “but that would likely carry a higher interest rate,” she says.

If you do get a medical card and plan to pay off in full before interest kicks in, pay close attention to when the promotional period ends, Susswein says, who adds that the end of the promo period sometimes falls before a payment is due, which trips up some consumers.

Overall, medical credit cards can help you save money if you understand the terms and conditions, follow the rules to the letter, and pay off the balance in full during the promotional period. Susswein says: “The problem is, life doesn't always work out that way, even if you have the best intentions.”