So you got an unbearable tooth ache, an urgent root canal or another throbbing pain in your butt. But, your credit cards are maxed out, your dancing with your paychecks to pay the bills and your backup funds are drained.
How to get from Point A to Point B in this situation?
No problem says the doctor, just sign up for a medical credit card that will cover the cost and delay payments till you feel better.
Our good friends at San Francisco-based Consumer Action just completed a survey of Medical Credit Cards and the diagnosis is not pretty and may add a lotta salt to that medical procedure.
Consumer Action reviewed seven credit card issuers that lend money specifically to cover health care expenses: AccessOne MedCard, GE Capital CareCredit, CarePayment, Citi Health Card, iCare Financial, MedKey Healthcare Finance and Wells Fargo Health Advantage.
Because the cards are marketed at providers’ offices, information provided by the issuers seems geared toward educating prospective business partners rather than consumers. Essential rate information was buried or missing from the websites of three companies’ cards (Citi Health, Wells Fargo Health Advantage and iCare). Even when Consumer Action called customer service, details often were elusive. A number of programs give health care providers the discretion to choose their own promotional offers, which further muddies the waters.
The Citi Health Card’s “go to” (non-promotional) rates of up to 28.99% aren’t disclosed on its consumer website, but are listed on its provider site. The Wells Fargo Health Advantage main site is addressed to providers and offers no rate information. Consumer Action used a search engine to find account agreements with interest rate disclosures.
iCare Financial promises that “Everyone’s approved with no credit check” but the company won’t answer questions from consumers, insisting that medical providers handle information on rates and terms. When following up with an iCare medical provider Consumer Action learned that a consultation would be required to get rate information.
All of the surveyed issuers promote alluring 0% introductory offers. Three cards (CareCredit, Wells Fargo Health Advantage and Citi Health) feature “deferred interest” offers for periods of six to 24 months. Interest accrues each month but is deferred for the promotional period. If the balance is paid in full before the period ends, no interest is due. If not, consumers must pay the accrued interest at rates of up to 28.99%.
Last year the Consumer Financial Protection Bureau (CFPB) hit CareCredit, one of our surveyed cards, with an enforcement action over deceptive enrollment tactics. The Bureau ordered the company to pay $34 million in refunds to consumers who thought they were taking out an interest-free loan but were billed for back interest at 26.99% after the promotional period expired.
Three surveyed issuers do not charge deferred interest: AccessOne, CarePayment and MedKey. CarePayment’s 0% offer lasts up to 25 months. AccessOne doesn’t charge interest for up to 100 months, based on the size of the balance. MedKey starts charging a relatively low 5.99% after the introductory 90-day interest-free period ends. AccessOne, MedKey and iCare cards offer 0% rates to borrowers regardless of their credit history and income. (AccessOne and MedKey are available only in limited regions of the country). Consumer Action can’t tell if iCare features deferred interest because it would not provide information about rates and terms.
Some service providers have an incentive to get their patients to sign up for a medical credit card. That might be the ability to schedule a procedure that the patient otherwise could not afford, or it could be the opportunity to be paid in full immediately rather than have to accept a protracted payment plan from an uninsured patient. In 2010, an investigation by then-New York Attorney General Andrew M. Cuomo found that some health care providers use fast-talking sales pitches to pressure and deceive consumers into applying for health care credit cards. (The investigation also found that one of Consumer Action surveyed card issuers, CareCredit, paid “kickbacks” in the form of rebates to the providers based on how much business they did on CareCredit cards.)
Medical loans—as opposed to medical credit cards—offer consumers more flexibility in how the loan is used but tend to have stricter rules for applicants, such as minimum credit scores (600 to 640). Consumer Action examined five companies: two direct lenders (LightStream AnythingLoan and Med Loan Finance) and three brokers (American HealthCare Lending, MedicalFinancing.com and United Medical Credit) who arrange financing with third-party lenders. Consumer Action decided to eliminate MedicalFinancing.com from its survey because Consumer Action could not access customer service representatives during business hours.
American HealthCare Lending and LightStream AnythingLoan (SunTrust Bank) offered fixed-rate installment loans with no deferred interest, while United Medical Credit featured 0% promotions with deferred and non-deferred interest offers.
Med Loan Finance featured hefty finder’s fees starting at $99 and swelling to $1,995, depending on the size of the loan.
Consumer Action offers these suggestions to consumers:
1. Don’t use a medical credit card to pay for services in advance. It may prove difficult or even impossible to get a refund for services you don’t use.
2. Making only minimum payments during the deferred-interest period will not pay off your entire balance by the end of the 0% period. You need to pay more than the minimum—sometimes much more—to accomplish this.
3. Know precisely when the no-interest period expires (it may be a few weeks sooner than you expect) and pay in full before that date.
4. Don’t pay late or miss a minimum payment during the deferred-interest period because you may void the deal and trigger finance charges.
5. Consider other payment options before accepting a deferred-interest offer.
6. Some medical providers will agree to extended payment plans, without interest.
7. For uninsured consumers with little income, hospitals have charitable funds that can assist.
8. Zero percent offers on general-purpose credit cards (with low long-term rates) can provide real savings compared to deferred-interest plans.