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What should I know about medical credit cards and payment plans for medical bills?

Some health care providers offer financing options to help you pay for your medical bills, including medical credit cards or payment plans that allow you to pay in installments. These financial options have downsides. Here’s how they work and what to consider.

If you’re unable to pay a medical bill, you have a few different options to cover those expenses.

First, your medical provider may be required to offer financial assistance or charity care that reduces or covers the full cost of care or your insurance may actually cover the procedure. You may also have other protections under federal or state law that can help with your medical bill. You should always ask about available financial assistance and what your insurance covers before agreeing to a payment plan or a medical credit card.

Your provider may also suggest you could use a medical credit card or a payment plan to pay your medical bills over time, but it’s important to understand that there are risks and costs with these options. Here’s what you need to know:

The difference between medical credit cards and medical financing plans

Two of the most common financial products offered by your provider or hospital are medical credit cards and medical financing payment plans.

Medical credit cards

Unlike a regular credit card, a medical credit card is used only to pay for medical services. Traditionally, these cards were used to help cover procedures insurance didn’t cover – such as hearing exams, dental care, or cosmetic procedures – but over the years, they’ve been expanded to cover other healthcare charges for treatments received in hospitals or from other providers.

How it works

A doctor or member of their staff generally signs you up for a credit card, and the credit card company checks your credit. If approved, the credit card company pays your doctor, and you’re responsible for paying back the credit card company.

What to consider

The interest charge on medical credit cards is often deferred for a period of time. This means that if you pay off your debt within this time, you can avoid paying interest. But, like other credit cards, if you make late payments or have an unpaid balance once this promotional period ends, you may end up with significant interest and fees on top of your medical bills. It can also impact your credit.

Medical bill payment plans

Some health care providers also offer payment plans or lines of credit directly or through other lenders. Similar to Buy Now Pay Later products, you pay back your medical bills in installments.

How it works

If you choose to use a payment plan, your payments are made to a medical financing provider and the medical provider is reimbursed as you pay your bill.

What to consider

Some of these plans may be interest-free while others are promoted as a way to break up your payments into installments with deferred interest. With the latter, there’s generally a point when your deferred interest ends. If you haven’t paid your bills in entirety by the end of this period, you’ll be paying back your medical bills, plus the often high cost of interest.

How these medical financing options vary

If you decide to use a credit card or payment plan to pay your medical bills, take note of how your options vary and might impact how much you are charged:

  • Services covered: Some medical credit products can only be used for “elective” procedures, or those not labeled medically necessary, but some can be used more broadly for various medical expenses. Some only cover dental, vision, hearing, and/or veterinary services. Check to make sure your financing option can be used for your desired medical service.
  • Provider partnerships: Some payment products can only be used at certain providers, while others can be used at a variety of medical providers and hospitals. If you are looking into financial products not explicitly recommended by your medical provider, confirm it is accepted by your provider.
  • Continued use and family coverage: Some products function as a general-purpose credit card, and you can continue using your card for any approved services after approval. Similar cards might also cover care for your family.
  • Interest rates: The interest rate generally varies with each option. Take note of when interest rates start accruing and if your plan offers a fixed or variable APR, or if it charges compounding interest. Additionally, a low or zero-percent APR could signal a “deferred interest promotion,” discussed below.
  • Credit check: Some products require a credit check prior to approval. Others will advertise that no credit check or reporting is required for you to be offered financing. Be aware that in the latter circumstance – though this might be the faster option to pay for your medical bills – the company places responsibility on you to determine whether or not you are financially prepared to undertake the loan that is offered.
  • Payment schedule and additional fees: Different medical credit products also have varying fees and payment schedules. Read the terms of the agreement to understand when interest may start to accrue or change, as well as when certain fees may apply. Understanding when the payments are due will also help you avoid additional fees, including late fees. Some medical payment plans or financing options may also have administrative or processing fees , and you should confirm whether you or your provider will be responsible for paying those.

How providers benefit from medical credit cards and payment plans

Your medical provider may have financial incentives in offering you a medical financial product. Your provider’s incentives may not always align with what is best for you.

Incentives that may influence medical providers:

  • They increase their business. The patient is less likely to delay or defer treatment to “shop around” for other options if they can make the payment. This includes patients who do not have insurance or otherwise could not pay in full out-of-pocket.
  • They receive full payment quickly. Some products advertise to providers that they’ll be paid in two business days, while others advertise they will be paid in full instantly.
  • They reduce the time and cost of billing and collecting unpaid bills. Providers avoid managing accounts receivable, mailing statements, and negotiating billing disputes. Providers also avoid debt collection costs, as the lender financing your medical credit card or payment plan will also be responsible for debt collection.

Though medical providers stand to benefit from suggesting medical credit cards and payment plans, it might not be in a patient’s best interest to sign up for one of these products. Patients should be aware of some pitfalls when entering into agreements for medical financial products:

  • You receive care quickly but might be prescribed more expensive treatment than you would be otherwise. One financial provider advertises to medical offices that their product can be used “for customers that want a product/service but don’t want to pay the full amount upfront today. This gives you, the business owner, the power to upsell and increase your sales.” If you quickly proceed with a provider and do not get a second opinion, you may receive more expensive treatment than you need.
  • You might receive insufficient information on the financial product to make a fully informed decision. This could land you with a procedure and financial plan you are actually unable to afford.
  • You may be eligible for financial assistance and not need to rely on a payment plan or credit card. Always check if your provider is required to offer you financial assistance based on your income level. In fact, if you prematurely sign up for a medical financing product, it might be harder for you to receive the financial assistance that you are entitled to, though you still have the right to pursue it.
  • You may end up paying more using a medical financing product than using existing lines of credit. Using your existing credit cards or seeking alternative financing options, such as bank or credit union personal loans, could be a cheaper method of financing your medical care than these medical credit cards or payment plans.

What to be aware of when considering a medical credit card or financing plan

While medical credit cards and medical financing plans can seem alluring, especially in a stressful moment of need, keep a few things in mind before signing an agreement that might not be your best option.

Medical financial products can impact your credit score

Even if your product didn’t require you to undergo a credit check prior to approval, missed payments on a medical credit card or installment plan can show up on your credit report. If your lender reports any delinquencies to a credit reporting company, this can reduce your credit score and affect your applications for credit, housing, or employment.

Though new protections reduced reporting of medical bills to credit reporting companies, these protections do not apply to unpaid medical bills through a medical credit card or financing plan.

Learn more about credit reports and scores

Beware of deferred-interest promotions

Even if the financial product you’re interested in charges a zero-percent or low interest rate, beware of temporary promotional periods. Once the promotional period ends, they’ll charge much higher interest rates – even upwards of 25 percent in some cases – for any remaining overdue balance. If the balance is not fully paid by the end of the promotional period or a payment is missed, interest will accrue on the full amount charged, rather than only on the remaining amount due.

Learn more about deferred-interest promotions

Your provider might be required to offer you financial assistance

If a medical provider or hospital offers you medical cards and medical payment plans as payment options, you should ask if you’re eligible for financial assistance instead. Nonprofit hospitals – and some private hospitals – must provide free or reduced fee care.

Be aware that once you put your hospital bill on a regular or medical credit card, it may be more difficult to receive financial assistance from your medical provider. You still have the right to seek financial assistance, even if you’ve already paid. While medical providers have incentives to direct you toward these payment plans, they don’t always have incentives to notify you of charity care options. Inquire about charity care options at your hospital if you are not being provided sufficient information.

Learn more about charity care

You might be better off using a conventional credit card or looking at other financing options

Medical credit cards and medical payment plans are often more expensive than other forms of payment, including conventional credit cards, with interest rates reaching above 25 percent. Based on your need and existing financial obligations, you might find you’re better off using one of your existing credit cards.

Also, if you have time before your medical procedure, you can look at alternative financing options, including checking with your bank or credit union about personal loan options. Another option is to accept a bill from your medical provider and decide how you will pay later.

Keep in mind that your medical bill may include the wrong or higher amounts than you should be billed. You can negotiate it with your medical provider, but if inaccurate or invalid medical debt appears on your credit report, you should dispute it with the credit reporting companies.

Know your rights and protections when it comes to medical bills and collections, consider all financial assistance options, and learn more about what you need to consider when signing up for a new form of credit.

If you are having an issue with credit cards, medical debt collections, or credit reporting, you can submit a complaint with the CFPB.