3 Disturbing Facts About Medical Credit Cards

If you've been to the doctor or dentist recently, there's a good chance you've seen promotional materials for medical credit cards. A medical credit card is a credit card that's designed specifically to pay for healthcare expenses, though you can often use them for veterinary bills as well. The pamphlets you see often advertise no-interest financing.

These offers can be tempting when you're dealing with the stress of a major medical bill or your pet needs expensive care. And given that about 14 million adults in the U.S. have medical debt in the amount of $1,000 or more, you're certainly not alone if you're struggling with the high costs of healthcare. But here are three risks you need to know about before you apply for a medical credit card.

1. The no-interest period isn't quite what it seems

If you see a medical credit card that advertises a no-interest period, read the fine print carefully. Often, you'll find that deferred interest will accumulate during that period.

Suppose you got a regular credit card with a temporary 0% APR. If you charged $5,000 on the card and still had a $1,000 balance remaining at the end of the no-interest period, you'd only get hit with interest on the $1,000 you owe.

But with deferred-interest financing, you get charged with the interest on the entire amount you financed. So in the example above, you could wind up owing interest on the $5,000 you charged to the medical credit card, even though you only had $1,000 remaining when the promotional period ended.

This may not seem important if you're confident you can pay off your charges before the no-interest period ends. But according to the Consumer Financial Protection Bureau (CFPB), people paid deferred interest on about 20% of purchases made using a medical credit card between 2015 and 2020. When interest is charged, it inflates the cost by around 23%.

2. You could wind up with more costly care

Even if you don't pay interest on your charges, a medical credit card could cause you to get pricier care than you needed. A 2023 CFPB report found that medical credit card companies sometimes market their products to providers with the promise that they'll be able to offer more expensive treatments.

For example, one medical finance company advertised to providers that its credit product "gives you, the business owner, the power to upsell and increase your sales" if someone doesn't want to pay the full upfront amount for a treatment.

3. You lose credit reporting protections

When you owe money directly to a healthcare provider or hospital, the debt won't appear on your credit report until it's at least six months delinquent due to recent credit reporting changes. Medical collections of less than $500 no longer appear on credit reports, either.

But medical debt becomes credit card debt when you charge it to a credit card -- be it a medical credit card or a regular credit card. Once you use a credit card, you lose the reporting protections that apply to medical debt. Charges you make to a medical credit card have the same impact on your credit score as any type of credit card debt.

Alternatives to medical credit cards

It's essential to take care of your health, and sometimes a medical credit card can be the best way to pay for the treatment you need. But be sure you consider the alternatives.

If you have health insurance, be sure you've contacted your insurance company to find out whether it'll cover any of the cost. You can appeal the decision if your insurer refuses to pay for a service that you believe should be covered.

Also discuss whether you can work out a payment plan directly with your provider. This option is less widely available than it used to be, as many providers are steering patients who can't afford to pay upfront toward third-party medical credit cards and payment plans, but it's still worth asking. If you have a large hospital bill, you're more likely to be able to work out a payment plan directly through the hospital, as many offer patient assistance programs.

Finally, if you need to pay with credit, be sure to compare your options. If you're not sure whether you'll be able to pay off a medical credit card before the no-interest period ends, you may be better off paying with a regular credit card with a temporary 0% APR. Once interest starts to accrue, the rates on a regular credit card are typically lower than you get with medical credit cards, plus you can avoid deferred interest.