Medical credit cards: Can they harm your financial health?

With many Americans out of work and companies cutting benefits like health insurance, more of us may be faced with the couple looking worried over bills piling upprospect of paying out of pocket for some of our medical care. This article highlights the growth of medical credit cards, which are pitched to consumers as a way to help them pay for their medical bills. Even if you have health insurance, these cards can be useful for things like laser eye surgery, cosmetic dentistry and even veterinary care.

But as this article spells out in much greater detail, you have to be on top of your game if you want to avoid getting hit with potentially huge finance charges. Also, it's troubling to note that some medical offices have financial incentives to sign people up for the cards, which means you need to be your own advocate when it comes to figuring out if these cards are right for you. Even if you decide the answer is yes, your responsibility doesn't end once you fill out the paperwork and get approved.

I know this personally. My family turned to one of these cards a few years ago when our dog had to have emergency surgery to the tune of several thousand dollars. Although we had a savings account for emergencies, it wasn't enough to cover the bills. I split the bill, paying half out of pocket to avoid completely draining my emergency stash, and put the other half on the card. The amount was large enough to qualify for interest-free financing for six months, which gave us enough breathing room to come up with the balance. For the next six months, I stayed on my toes: I paid the bill as soon as I received it, then followed up each time to make sure the payment had been processed. While it might not have been my fault if a check had been lost in the mail, from the card company's perspective, that late payment would have given them the excuse they needed to hike my rate and slap retroactive interest on me.

When the first bill came, I ignored the "minimum payment," figuring that was calculated to keep me paying well beyond my interest-free window. Instead, I divided up what I owed by six, then paid off that much each month so I'd be in the clear by the time the promo expired. I also kept an eye on the due date, since I knew some card issuers will change those with little warning. Finally, I made sure the balance was paid off well in advance of the end of my six-month promo period; if anything had come up or there had been even a tiny balance left on the account, I had a couple weeks to correct it before getting socked with all of that retroactive interest. If I hadn't taken these steps, I'd have been saddled with an interest rate of 22% -- that's higher than nearly all conventional credit cards for those with good FICO scores, and it's even higher than a lot of store credit cards out there. If I'd dropped the ball and missed a payment, my APR would have zoomed up to 29%

The article points out one reason why these cards are so popular: People turn to them because they feel pressured. Even if you'd normally shop for a good rate on a credit card, if you're sick or in pain, you might let your guard down. Obviously, we can't tell you not to get sick or hurt yourself, but we will suggest that you have an emergency financing plan in place before you need it. Maybe this means building up your emergency fund, or asking for a credit limit increase on your existing cards before you need it.

If a medical facility pushes you toward a medical credit card, pipe up and ask what your other options are. Some doctors will let you work out a payment plan with them directly; if you have out of network benefits, they might be willing to accept what your insurance company will give them, even if it's less than the amount on the bill. If you don't think you can pay off the balance on the credit card before the promotional period ends, ask for other alternatives because the interest on those cards can be so high. You just have to ask. That can obviously be intimidating to some people, all the more so when you're under the weather and not feeling like yourself. But your financial health could depend on it.
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