Some healthcare providers offer medical credit cards that allow patients to finance the cost of their care. While these cards provide temporary relief from the financial hardship a big medical bill brings, they can also put you deep in debt. Author, motivational speaker and personal finance expert Suze Orman recently weighed in a Consumer Financial Protection Bureau report explaining how the cards work and advising consumers to be aware of the pitfalls before using one.
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The CFPB noted that some medical credit cards can only be used to charge elective procedures or are limited to dental, vision, hearing or vet services. In addition, you might have to use a particular provider, and that provider might do a credit check before approving you for credit.
As Orman explained, medical credit cards also differ from regular cards in that they might have an interest-free promotional period of six to 18 months. After that, the deferred interest expires, and you could be stuck paying a high rate — around 25%, the CFPB said — on the entire original balance, not just the remaining amount you owe.
“If you’re not very careful, medical credit cards can be a very costly mistake,” Orman warned. She offered tips for avoiding them if you can, and reducing the risk if you have no other choice but to charge your care.
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Build Up Your Emergency Savings
“The sad state of our healthcare system is that it is increasingly shifting more costs to consumers. You need to plan for that reality by having savings ready to cover care costs when they arise.
Avoid Using a Medical Credit Card for Elective or Costly Care, Especially at the Dentist
Orman recommends looking into dental savings plans.
Ask for a Payment Plan
Direct payments to your provider, or even financial assistance from a hospital or other facility, is safer for you and could reduce your costs.
Don’t Use a Medical Credit Card Unless You’re Sure You Can Pay it Off Before the Interest Kicks In
A card with a long interest-free promotional period is the safest bet.
Use Your Regular Credit Card
If you have a regular credit card or qualify for a new one, you might get a better interest rate by using it instead of a medical credit card.
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The CFPB recommends exploring all financial assistance options that might be available to you and stresses the importance of knowing your rights when it comes to medical bills and collections.
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