5 tips when comparing health-care credit cards
If you're stuck with a medical bill that's more than
you can afford to repay in cash, a credit card that's designed specifically for
health-care expenses may help you quickly fill the gap.
Most medical credit cards offer long-term, interest-deferred financing and you can usually get instantly approved. However,
before you apply for the first card you see advertised in your medical
practitioner's office, think hard about the kind of loan you are
signing up for, say experts.
(See CreditCards.com's "Health-care financing comparison chart" and "Medical credit cards: Treatment today, payment headaches tomorrow")
"In any borrowing situation, you want to find the
absolute best terms," says Karen Carlson, director of education at the
nonprofit credit counseling agency InCharge Debt Solutions. That way, you don't
wind up paying far more for a procedure than you need to.
Here are five expert tips for helping make sure you
choose the best loan option for health-care financing.
Don't assume it's a good deal
you're like most people, the first time you learned about a particular kind of
medical credit card was probably at
your doctor's office.
The receptionist may have handed you a brochure
after you asked about medical financing. Or you may have noticed the brochures
while waiting to be called in.
Many health-care providers -- especially those who
serve patients with limited health insurance coverage, such as dentists -- partner
exclusively with third-party creditors, such as CareCredit or Citibank, on
special financing deals for patients.
The cards help doctors' offices get repaid quickly for
services while offering patients a way to finance procedures they may not otherwise
be able to pay for all at once.
However, don't be fooled by the brochure's glossy veneer
-- or by the fact that your doctor's office is recommending it, say experts. Just
because your health-care provider is offering a particular card doesn't mean that
it's the best deal out there.
People hold their doctors in very high esteem, but
doctors are not trained to give financial advice.
InCharge Debt Solutions
Too often, "people put blinders on and look at the
advertising and the kind, loving stock photos and just assume that because it's
designated as a medical credit card, it somehow has better terms than other
kinds of loans," says InCharge Debt Solution's Carlson.
However, that's often not the case, she says --
especially if you can't afford to repay a card's balance by the time its
promotional deal expires. "One major provider, the standard interest rate is
26.99 percent," says Carlson. Unless you have truly blemished credit, you can
probably get a better deal with just a plain vanilla credit card.
"People hold their doctors in very high esteem, but
doctors are not trained to give financial advice," she adds. "They're there to provide you with high quality medical services."
Read the terms
medical credit cards offer long-term, interest-deferred financing deals that can
make signing up for the card seem like a no-brainer.
You may be able to get, for example, an interest-deferred loan on a pricey medical procedure that
gives you anywhere between six and 24 months to pay it off.
But there's a catch. With a deferred-interest credit card, if you don't repay a card's balance
in full by the time the promotional period expires, you may be charged the
card's standard interest rate on the entire amount charged to the card --
retroactive to the date of the first purchase.
"Look at the fine print," says Mark Rukavina,
founder of the health-care consulting group, Community Health Advisors. "Look
long and hard to make sure if you sign up for one of these cards you're going
to be able to repay according to the terms."
Do the math
you've scanned the terms and conditions that are included with the application,
use a loan payoff calculator to see how much you'll have to pay each month to retire the debt before the interest-free promotional period expires. You may find that the monthly payment that is needed to wipe out the
balance before interest kicks in is far more than you can afford to pay, says InCharge Debt Solution's Carlson.
Don't rely on the lender to calculate your
monthly payment for you, adds Jill Nussinow of Santa Rosa, Calif.
Nussinow, who has a CareCredit card, says she
learned the hard way. After she began using her card, she became confused by
the monthly payment that was listed on her credit card statement. Nussinow
assumed that the payment CareCredit listed would add up to the full amount owed
by the time the promotional period expired.
However, it turns out that was just a minimum
monthly payment. "What they don't tell you when you get the card is that the
payment that they ask you to make does not cover the actual payment if it were
divided into equal payments for the year of free interest," says Nussinow. "Initially,
I was paying the amount that they said was the payment, [and] the balance was not
changing much," she says.
What they don't tell you when you get the card is that the
payment that they ask you to make does not cover the actual payment if it were
divided into equal payments for the year of free interest.
|-- Jill Nussinow
Santa Rosa, Calif.
However, "once I spoke to someone and they explained
that, I changed from making the $40-per-month payment that they say is due as
the minimum payment to $150 so that it can actually get paid off."
"You should really pay attention to what it is that
you're signing up for, and what it is that you're doing," Nussinow adds. "Very
rarely is there a free ride."
Consider your options
Just because a health-care provider mentions a particular payment option
doesn't mean it's the only loan available to you.
"There are many ways to borrow money," says Carlson.
Research your options before you apply and see if you can find better terms
with a similar interest-deferred or low-interest deal, she says.
"This advice is not unique to medical credit cards,"
Carlson adds. Ask yourself, 'Are these the best terms you can get? Can you
afford it?' Then shop around."
Don't be afraid to ask at your doctor's office
whether it offer its own extended payment plan, says Rukavina. "Communicate with the provider and see whether they have some
ideas or some sort of program in place to help," he says. "Oftentimes people
don't ask this and they're not made aware" of alternative payment plans.
If the health-care provider doesn't offer an extended payment
plan, it still may be willing to give you a discount, says Rukavina, or
recommend another program that can help. "People just should not be reluctant
to ask whether there's any kind of financial assistance out there, or whether
fees can be reduced, or whether the provider would be willing to negotiate an
extended payment plan," he
Think back on how you've used credit in the past
know yourself better than anyone else, says Carlson. Before you sign up for any
kind of loan, look at your past behavior. Ask yourself if you are disciplined
enough to repay the debt before the promotional period expires on a medical
For example, if you're the kind of person who pays
off your credit card balance each month, then a deferred-interest loan may be a
good option. However, if you're a minimum-payment type, a
deferred-interest card can be a terrible option, says Carlson.
Health-care credit cards work best if you can afford
the monthly payment during the deferred-interest period and if you are
financially stable and can work within a budget, she says.
But be honest with yourself about whether that
description fits how you really use credit. "Don't live in a dream world," says
See related: Infographic: Medical bill trouble often part of larger money woes, Who's liable for a minor's medical debt?
Published: March 21, 2013
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