What Is a Medical Credit Card?
If your health insurance doesn't cover a medical procedure you need, you might find yourself with a medical bill that you're unsure how to pay.
One option your health care provider might offer is a medical credit card. Though it might seem like a good deal at first, especially if you have few payment options available, a medical credit card isn't always the best choice. Here's what you need to know about using a medical credit card to pay for health care costs.
What Is a Medical Credit Card?
A medical credit card is designed to pay for medical expenses. It's usually possible to apply for a medical card at a doctor's office. Alternatively, you can apply for a credit card before your visit and verify whether it's accepted by your health care provider, according to J.R. Duren, a personal finance reporter for consumer product research website HighYa.
[Read: Best Balance Transfer Credit Cards.]
Medical cards might not cover every medical expense, however. Card issuers typically have specific services you can pay for with the card, such as LASIK, dental care or cosmetic surgery.
When it comes to the payment terms, medical credit cards usually require you to charge a minimum amount for a purchase to qualify for interest-free financing. The card issuer may offer you a zero-interest plan for up to two years, depending on the card, Duren says. "In other cases, (you may be offered) a reduced-interest plan for bigger purchases that need extended financing -- 24 to 48 months, for example."
However, it's important to note that the interest-free period may not remain truly interest-free. If the interest is deferred, which is common among medical credit cards, you must pay off the full balance before the introductory period is over to avoid paying the interest.
"Say you get 18 months of zero percent interest for a $5,000 procedure," Duren says. "If you don't pay off the full $5,000 by the end of the zero percent period, you'll have to pay interest (retroactively) on the entire original amount."
If you miss a payment, the consequences can be severe. Not only will you incur a late fee, but you'll also forfeit the promotional rate.
Types of Medical Credit Cards
There are three major cards you can use at a number of health care providers.
CareCredit. It covers services such as cosmetic surgery, dentistry, and primary and urgent care. The CareCredit credit card typically comes with a 26.99 percent variable annual percentage rate and offers deferred interest for six, 12, 18 or 24 months. However, if you charge $1,000 or more, the interest rate drops to 14.9 percent for 24, 36 or 48 months. If you charge $2,500 or more, the interest rate jumps slightly to 16.9 percent for 60 months. According to the company, the card is accepted at more than 200,000 locations across the country.
Wells Fargo Health Advantage. This medical credit card offers a much lower APR of 12.99 percent on all purchases. However, you can't use it to pay for as many procedures as the CareCredit card covers.
AccessOne MedCard. The interest rate and other options on the AccessOne MedCard vary by health care provider. It can be used to pay for a variety of general procedures.
[Read: Best Low-Interest Credit Cards.]
Medical Cards vs. Traditional Credit Cards
Though both types of cards work the same way, medical credit cards have very limited use. You're only able to pay for certain qualifying medical expenses with a medical card and only when the hospital or service provider accepts that particular method of payment.
Medical credit cards also fail to provide the perks that many traditional credit cards offer. "There are no points or rewards," says RJ Mansfield, author of "Debt Assassin: A Black Ops Guide to Cleaning Up Your Credit." He notes the interest rates on medical credit cards may be higher than those of traditional credit cards after any applicable promotional interest period.
Duren says, if anything, medical credit cards are most comparable to retail store credit cards due to their limited application, typically higher interest rates and deferred interest offers.
One thing that medical and traditional credit cards do have in common: They both impact your credit. Medical credit cards typically require a credit check, and you can be denied if your credit score or other factors don't meet the issuer's requirements. Your payment activity on a medical card is also usually reported to at least one of the credit bureaus. Though positive payment activity isn't always reported, missing payments will negatively impact your credit score.
Is It a Good Idea to Pay With a Medical Credit Card?
Ultimately, the decision of whether to pay for medical expenses using a medical card will come down to what other options you have at your disposal. If you can get a zero percent interest offer and you're sure you can pay off the balance on your medical card within the promotional period, it can be a good option. However, if you'll pay interest on the balance, there are other payment options you should consider.
Zero percent interest credit card. Traditional credit cards with zero percent interest offers typically don't have deferred interest. That means when the promotional period is over, you won't have to pay interest on the full amount, only the balance that remains, if any.
[Read: Best Zero Percent APR Credit Cards.]
Personal loan. Personal loans may offer lower interest rates than credit cards and have a specified term, so you know ahead of time how long it will take you to pay the balance.
Payment plan. If you have poor credit, it might not be possible to qualify for a traditional credit card or loan. In this case, you might want to work out a payment plan with your medical provider instead. In fact, if your medical provider offers interest-free payment plans, it might be the best option, regardless of what shape your credit is in. "Always ask your doctor's office, hospital or surgery center if they offer payment plans," Duren says.
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