medical credit card

Being told by a dentist that you need a root canal is bad enough. Figuring out how to pay for it only adds to the pain.

Some dentists and other health care professionals such as eye doctors, audiologists and even veterinarians offer medical credit cards to help patients spread the cost of a procedure over time and make paying for it easier. The credit cards are used to pay for health care services that aren’t covered by insurance or Medicare, or are expenses a patient can’t afford.

Doctors who provide medical credit cards aren’t providing loans themselves to patients, but are working with third-party companies that offer the cards.

Appeal of Medical Credit Cards

The main benefit of the cards is that they allow a medical bill to be charged to them and then paid back over months or years without paying interest on the loan. The interest is deferred and if the bill isn’t paid off before the interest-free promotional period ends — such as 12 months — then the interest is added retroactively to when the purchase was first made.

The interest rates are usually high. One medical credit card provider, CareCredit, has an interest rate of 26.99 percent for new accounts.

For a health care provider, the cards can be a way for patients to pay for treatment they need immediately.

They can also get doctors and their staffs out of the business of billing patients again and again because the cost will be put on a credit card and the card issuer will pay the charge upfront. If the borrower doesn’t pay, the credit card company is at risk instead of the medical provider.

Be Wary of Deferred Interest

Medical credit cards can turn a large bill into manageable monthly payments, but only for a certain amount of time.

No interest is typically charged for six, 12, 18 or 24 months. After the zero percent interest period ends, the interest will be charge retroactively unless the loan is paid off entirely.

Minimum monthly payments are required during the promotional period, though higher payments will likely be needed to pay the balance off during that time.

Interest can also be charged if you’re more than 60 days late on a payment, warns the Consumer Financial Protection Bureau, or CFPB.

How Interest on Medical Credit Cards Works

Here’s an example of how interest on a medical credit card can add up. CareCredit gives an example on its website of a cardholder with a $1,200 medical charge with no interest charged if paid in full within six months.

A $200 monthly payment for six months would pay off the $1,200 without any interest charged.

But make only the minimum monthly payment of $39 in the first month and slightly lower every month afterward, then the $1,200 balance would only drop to $1,134 after six months. If only the minimum payment was still paid each month, it would take 96 months and cost $2,693 to pay off the loan at 26.99 percent interest.

The $1,493 in interest paid over that time is more than the amount borrowed in the first place.

The zero interest promotional period is offered on loans for six, 12 or 18 months. For loans of 24 months or longer, fixed monthly payments with interest are offered.

The interest rates on the longer loans are lower, but because interest isn’t deferred, borrowers can’t avoid paying interest on the medical credit card. The loans work more like a car loan than a credit card.

CareCredit offers 16.90 percent interest when borrowing $2,500 or more for 60 months. A fixed monthly payment is required over that time, like a car loan, so that the loan is paid off during the repayment term of 60 months.

For example, a CareCredit cardholder borrowing $2,400 over 48 months at 14.90 percent interest would have 48 equal minimum monthly payments of $67. At that rate, $3,201 would be paid in 48 months: $2,400 in principal and $801 in interest.

Your Options

If you have a deferred interest medical credit card, the CFPB recommends knowing when the deferred interest period ends and paying more than the minimum each month. Calculate how much you’ll have to pay each month to pay off the purchase on time or early.

It also recommends asking your credit card company to apply anything you pay above the minimum monthly payment amount to your deferred interest balance. It may be doing this already, but it’s a good idea to check.

Also make your payments on time. Late payments can lead to owing all of the interest that would have been deferred.

Pay off the balance well before the deferred interest period ends. This can help in case your payment arrives late in the mail or you forget to make the last payment.

Even without a medical credit card, you may be able to pay your medical bill without paying interest. Ask your medical provider if you can work out a payment plan with them directly over time without interest.

If you’re checking out of a hospital and are tempted to put the bill on a regular credit card or a medical credit card, know that doing so may make you ineligible for the hospital’s free or reduced fee care for patients who can’t afford treatment. Such “charity care” programs are meant to help people pay their hospital bills, though not if charged to a credit card.

If you’re offered a medical credit card at your doctor’s office, ask the staff to explain how it works and how much interest you’ll be charged if the credit card bill isn’t paid in full during the promotional period. A medical credit card application is something you want to understand just as much as any medical procedure you need to have.