Should I cancel my CareCredit card?

Keeping it open should boost your score if used right; just beware of its high APR

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question Dear Opening Credits,
I had a dentist appointment several weeks ago, and we came up with a treatment plan for my teeth. I had to get two fillings, and the resin costs about $709 (not covered by insurance).

I asked for a payment plan, which ended up being a CareCredit card to finance the leftover balance (I am a college student and could not afford $709).

The payments were to start 30 days after the procedure with 0 percent interest as long as the balance was paid within the promotional period. The limit was $2,000.

This is my first credit card, and I only have student loans and my car loan balance on my credit reports.

Long story short, I decided to cancel the fillings and they said they would refund that amount on the card. I am going to switch dentists because I’m not able to make it back anytime soon, but I still have this card open.

I have been reading about hard inquiries and credit cards, and I want to know what is my best option? Should I close the card? Leave it there? It will never be used, it has already lowered my score and I know closing it will lower it further, but I am unsure of the route to go. – Danjee

Answer

Dear Danjee,
I’m sorry you had such a frustrating experience with your dentist! But now that you have this card open, you may as well hang onto it for a bit. It’s there for you in case of a health emergency, and it’s not hurting your credit rating.

In fact, you can use the account to improve your credit scores and eventually help you qualify for a credit card that you can use for more than health-related costs.

Although applying for CareCredit did result in a small credit scoring dip, you needn’t worry about long-term damage. Hard inquiries can only affect a credit score for up to a year. As long as you keep your other accounts in good standing, your credit score will quickly rebound.

If you’re currently repaying your student loans, be sure to get those payments in on time. Do the same with your car loan payments. Since payment history is the most important credit scoring factor, making those due dates is paramount.

The value of keeping a card for medical emergencies

With the CareCredit account, you have a substantial unused credit line that is acting as an insurance policy in case of a medical disaster. You’ve discovered that dental work can cost a small fortune, but so can an insurance deductible or a trip to the emergency room.

It might be nice to have this account at the ready in case you don’t have cash for the bill. Instead, you can borrow and pay it off over time. However, you may need to contact the card issuer to see when the 0 percent promotional period expires and if it can be applied toward a new charge.

If you are extended a 0 percent interest promotional period, it is extremely important that you pay off the debt before that time because CareCredit’s typical APR is extremely high – 26.99 percent.

Make sure to pay off balance

Another caveat to using the CareCredit card: If you are extended another 0 percent promotional period, be absolutely sure you can pay off the balance in that time period by dividing the balance by the number of months in the promo period.

Pay no attention to the “required minimum payment” on the statements as those may not add up to the entire balance owed within that specific time frame. If the balance is not paid off in time, interest will be charged to your account on the entire purchase.

Use the card to boost your credit

If you want to build your credit rating with the card, you can pay for things such as flu shots and prescriptions with it. Avoid interest charges by sending the entire payment in each month. Your payment activity will be listed on your credit reports and positively calculated into your credit scores.

When they’re in a healthy range (at least 700) and you have a steady income, consider applying for a general-purpose credit card.

When you qualify for a new card, you’ll have another choice to make: Keep both cards or close the CareOne account? To answer that question, consider whether you’d like to have the available credit line for medical expenses. If so, keep it; if not, go ahead and cancel.

See related: 5 reasons not to put medical bills on credit cards, Medical credit cards: Treatment today, payment headaches tomorrow

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Updated: 11-22-2017