Should I Get A Medical Credit Card?

A medical credit card is similar to a regular credit card, but there are some key differences. Medical credit cards can only be used for certain covered medical expenses and are only accepted by certain healthcare providers. Many of these cards advertise very appealing promotional terms. After the promotional period ends, though, medical credit cards typically charge high interest and fees. 

In many cases, there are better options available to pay for medical expenses. This article will explain the benefits and drawbacks of using a medical credit card, help you decide whether this type of card is a good choice for you, and explore other medical financing alternatives you may want to consider.

What Is Different About Medical Credit Cards?

Most general credit cards—such as Visa, Mastercard, American Express, and Discover—are accepted just about anywhere. So long as the other party accepts the payment, there are no restrictions on what you can charge. Groceries, travel costs, video games, a speeding ticket: the type of purchase doesn’t matter. 

This isn’t the case with medical cards. These cards may only be used for certain approved medical or wellness purposes and tend to only be accepted by certain medical and wellness providers. Some examples of approved charges include:

• Medical bills from a dentist, doctor, or surgeon’s office, including the cost of cosmetic surgery or Lasik eye surgery

• Hospital bills

• Veterinary bills

• Prescription costs (in some cases)

Some medical credit cards, particularly those offered by CareCredit, can be used for pharmacy expenses, including prescriptions, as well as other general medical and wellness needs. The CareCredit card is even accepted at Walmart and Walgreens, though only for approved medical and wellness purchases. Other medical credit cards are typically accepted at far fewer locations than the CareCredit card.

A medical credit card might be a good idea if you want to keep a payment method on hand for medical emergencies but don’t want another general-use credit card. Also, medical cards are often the best choice for expensive veterinary bills, since many of the insurance options and financing programs available for human medical expenses don’t apply to animals. Not surprisingly, veterinary offices are some of the most likely providers that accept CareCredit cards.

Some of the most appealing aspects of general-use credit cards don’t apply to medical credit cards. For example, medical credit cards won’t help you build your credit. These cards rarely report positive repayment behavior to credit bureaus but tend to be quick to report any negative actions such as late payments. Medical credit cards rarely offer any type of rewards program, so you won’t earn miles or cashback as you will with some general-use cards.

Deferred Interest

Most medical credit cards offer consumers a deferred interest period. When a card advertises “0% interest if paid within six months,” the six months is the deferred interest period. CareCredit and other medical cards use these promotional financing offers to make their cards more appealing to consumers. People with higher credit scores often qualify for longer periods of deferred interest than those with lower FICO scores.

It’s important to be aware that this sort of deferred interest is NOT the same as an introductory period with 0% interest - the sort of promotion frequently offered by general-use cards like Visa or Mastercard. General-use credit cards that offer an introductory no-interest period do not charge any interest at all during the promotional phase. After that time runs out, interest starts to accrue on whatever your balance is going forward.

With medical credit cards, interest is merely deferred. In other words, if you don’t pay off the entire balance before the end of the promotional period, you’ll be charged interest on the balance going forward, PLUS retroactive interest on the full amount of all charges going back to the beginning of the deferral. This sort of deferred interest policy is common with medical credit cards and some retail credit cards. It’s very rare with general-use credit cards.

Always read the terms of any medical credit card agreement carefully. The fine print of some medical credit card agreements contains a provision which says that the deferment period ends if you are ever 60 days late on a payment, even if you’ve made all other payments on time. If the deferred-interest practice sounds like a trick to you, you’re not alone. In 2013, the Consumer Financial Protection Bureau (CFPB) fined CareCredit $34.1 million for failing to properly disclose to consumers how its deferred-interest policy worked.

The Market Leaders In Medical Credit Cards

There are far fewer medical credit cards than general-use cards. CareCredit, a subsidiary of Synchrony Financial, currently dominates the medical credit card market. CareCredit is accepted by more than 200,000 providers, far more than any other medical card. It is also accepted at retail pharmacies, such as Walmart, where it can be used for over-the-counter and prescription drugs, as well as wellness items such as toothbrushes and diapers.

CareCredit continues to appeal to consumers by advertising a deferred interest period and no annual fee. After the deferment period, though, CareCredit charges extremely high interest rates - typically around a 26.99% variable annual percentage rate (APR).

CareCredit does have some competitors, though they represent a much smaller sliver of the healthcare financing industry. These cards tend to be accepted by far fewer providers and have more limited uses:

• The Wells Fargo Health Advantage Card is a medical credit card that covers dental, hearing, vision, and veterinary services, with a 12.99% variable APR for all purchases.

• The AccessOne MedCard advertises that all patients are approved and that it does not report any information to credit bureaus.

• iCare Financial offers medical, dental, and veterinary financing and advertises no credit checks for applicants. iCare doesn’t deal directly with consumers, only with medical providers.

• Citi recently sold its healthcare credit card program to CareCredit, though many consumers are still paying on their Citi Health Card balances.

• MedKey was another medical credit company that has since succumbed to CareCredit’s market pressure. MedKey stopped accepting new charges or accounts as of July 1, 2020.

• The Chase Health Advance card was one of the earliest medical credit cards to fold to CareCredit. The company stopped issuing new accounts in 2012.

In Most Cases, You Have Better Options Than A Medical Credit Card

So, if you’re facing an expensive medical or veterinary procedure that your insurance won’t cover, what can you do? A medical credit card is one option, but in many cases, there are better alternatives available.

Direct Payment Plan

Before turning to third-party financing, talk to your provider about payment options. You may be able to work out a payment plan directly with the provider, often with affordable monthly payments and low or no interest charges. Hospitals often offer interest-free installment plans. Your provider may be willing to waive or reduce some fees to help you afford the procedure. In some cases, you could be eligible for reduced payments based on your income. You’ll likely need to provide proof of your income to qualify.

Personal Loan

You could also take out a personal loan to cover the medical bills. You can often get these loans through your local bank, an online bank, or a credit union. Many medical finance companies also specialize in medical loans to cover healthcare expenses and veterinary costs. These loans tend to have much lower interest rates than medical credit cards.

If an installment loan isn’t an option or you don’t qualify for these loans, you may want to consider other types of loans. A home equity loan, for example, allows you to borrow money against the equity in your home. These loans usually feature low interest rates, but be careful. If you default on a home equity loan, you could lose your home. 

A loan against your 401(k) or other retirement account is another example. These loans also usually have low interest rates and may seem like a safe bet, since you’re technically borrowing from yourself. Keep in mind, though, that if you don’t pay the loan back, the loan amount could be subject to income tax. In some cases, you could also owe a 10% penalty for making an early withdrawal.

General-Use Credit Card

If you must use a credit card to pay for medical or veterinary expenses, a general-use credit card is often a better choice than a medical card. Look for a card that offers a 0% intro APR, cashback rewards, or other benefits. You’ll likely be able to find a general-use card that offers better terms than a medical card’s deferred interest plan.

Charity Care

Some hospitals have charity care or similar programs. These hospitals are obligated under federal and/or state law to provide care at a reduced fee or free of charge for people who can’t afford treatment. If you qualify, you may be able to have your medical debt substantially reduced or even waived completely. 

To qualify for charity care, you must have received treatment at a participating hospital. It’s usually up to you to ask about and apply for the program, though some hospitals perform upfront applicant screening. You’ll likely need to provide proof of your income and information about your health insurance. Each provider will have different program requirements.

Also, some of your hospital bills may not qualify to be included in the program. At most hospitals, individual medical providers who provide services through the hospital but bill patients separately through their independent medical practices are usually exempt from the requirements of charity care programs.

Let’s Summarize…

If you have a substantial medical or veterinary expense that isn’t covered by insurance, medical credit cards may seem like a convenient solution. These cards are similar to regular credit cards but are only accepted by certain medical providers and can only be used for limited medical expenses. Medical credit cards advertise attractive offers, such as no interest if paid within a set number of months. Unfortunately, most cardholders aren’t aware of how these deferred-interest agreements work. If you can’t pay the entire balance within the deferment period, the credit card issuer adds all the deferred interest - often at an extremely high interest rate - back onto your bill.

In rare circumstances, a medical credit card may be your best option for financing medical procedures or veterinary treatment. Most of the time, though, other financing alternatives are better choices. You may be able to work out a payment plan directly with the provider, or you may qualify for reduced-fee or no-fee treatment. Personal loans and even general-use credit cards usually also offer better payment terms than medical credit cards do.