Best credit cards for medical bills
Medical bills can be scary, but the right credit card can help. CardRatings editors reveal the best credit cards for medical expenses to help take some of the pain out of your next doctor’s visit. … View More
Though it could be a great option for some, using credit cards to pay medical expenses might not the best choice for everyone. If you can pay the entire bill up front in cash, some medical facilities will offer some type of “cash discount.” Others might be willing to work with you on a zero-interest payment plan. If you can’t pay your credit card statement in full by the time its due, or before a 0% intro APR period expires, any rewards you might have earned from paying a medical expense will likely be canceled out by credit card interest charges. Do the research. Ask the questions. And evaluate your options to make the best decision for you. View Less
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What Are the Options for Paying Medical Bills?
When it comes to paying medical bills, each institution likely has their own policies, but there are some common options that could be available depending on your situation.
Some facilities will offer a discount if you choose to pay your bill all at once by cash or check. This can be a substantial savings if you are in a position to do it.
More commonly, many facilities have a credit department and are willing to work with a patient (or their family) on a payment plan. Often, this will be a zero-interest program. It might require setting up a monthly “electronic check” payment that will take the money directly out of your checking account each month.
Credit cards are also an option. Nearly all medical facilities accept multiple types of credit cards, with Visa and Mastercard the most widely accepted. If you use the right card and budget properly, you can pay off that bill without building up interest charges.
Should You Pay Your Medical Bills With a Credit Card?
It depends on a lot of factors. Credit cards can offer some extra time to pay off medical expenses, or earn you rewards on payments, but it’s important to remember that unpaid credit card bills have repercussions, too.
Medical facilities should be able to work with you by offering payment plans or discounts, which are things credit card issuers don’t generally do. With that said though, with responsible use and planning, using a credit card to pay for medical expenses can sometimes be a good option to consider. This is particularly true for credit cards offering a 0% intro APR period, either on new purchases or balance transfers, as these cards give users extra time to pay off balances interest free and could potentially allow you to earn valuable rewards on your hefty medical bill.
Just remember, once these promotional periods expire, regular rates will apply, so it’s important to pay off, or at least pay down as much as possible, your balances before that happens. Furthermore, don’t get sucked into the trap of paying a bill your can’t afford all at once on your credit card just to earn rewards. The rewards won’t offset the interest you’ll pay on that balance. If you need time to pay off a bill, and your card doesn’t offer a 0% APR period, you’re likely better off paying your bill on a payment plan through your medical provider.
What Are the Potential Risks of Paying a Medical Bill With a Credit Card?
A few of the risks include: increased credit utilization, possible interest payments, cash flow issues and situations of overpayment. We’ll break these down below:
The credit utilization ratio danger
If the medical bill is massive, you could quickly overwhelm your credit utilization ratio. As you may or may not know, a credit utilization ratio is the term that describes how much credit is available to you in relation to how much you’re using, and it’s a significant factor affecting your credit score.
So let’s say you have a credit card limit of $1,000. The algorithms that come up with your credit score would prefer you borrow no more than $300 or 30%. Lenders tend to think that if somebody is borrowing no more than 30% of their available credit, they’re pretty responsible. If you have a $900 bill due to a twisted ankle that took you to the emergency room, and your insurance didn’t cover all of it, suddenly those algorithms are going to say, “This chucklehead just spent $900 on a card with a $1,000 credit limit. Let’s drop the credit score a bit.”
Never mind that you are a very responsible credit card user who just had the bad luck to step on a skateboard your kid left in the middle of the hallway.
Now, keep in mind that credit scores are a long game, so if this is a once-in-blue-moon kind of thing, your score may drop for a moment, but should quickly recover as long as you are otherwise responsible with your debt and do get it paid off.
The interest rate hazard
There’s also the interest rate you need to think about. If you can’t pay that $900 any time soon, that $900 bill is going to actually be higher – so maybe you end up paying $970 or $1,042 or whatever, depending on how many months it takes you to pay it off. In particular, if you fall victim to only making the “minimum payment due” on your credit card statement, you could end up paying a LOT more than that $900 bill. Take a look at this credit card interest calculator to see how fast interest adds up.
The cash flow trap
Another thing to consider is that if you max out a credit card with a big medical bill, you may not be able to rely on your credit card for an emergency.
It isn’t ideal to use credit cards as an emergency fund, obviously, but it is nice to have for a, you know, emergency. If you’ve maxed out that card for a medical bill, you’ll be out of luck in that situation. The best case scenario is to have a solid emergency fund built up, but having a credit card available for a quick payment in an emergency is also a nice option to have.
The “I’m over paying my medical bills” threat
Another thing to consider. Sometimes hospitals or doctors’ practices overcharge – and then later, after the insurers get involved, and the dust settles, it turns out that you don’t owe as much. So even if you do plan on paying a medical bill with your credit card, you may want to try and hold off for awhile, rather than paying it at the hospital or doctor’s office. The bill may later be smaller.
In these situations, you’ll eventually receive a refund of what you’ve overpaid, but that will likely come in the form of a check rather than a direct refund to your credit card. And, if you’ve already paid interest on the charges you put on the credit card, that refund certainly won’t cover that.
Another thing to consider – hospitals and doctors’ offices often allow patients to do a payment plan, so you could pay them back, interest-free, over a number of months and keep your available credit available for things you actually want to buy.
None of this is to say that you shouldn’t use a credit card for medical bills, but if that’s your plan, and if you think you have any hospital or major doctor’s visits coming up that you’re aware of and believe you’ll get socked by a large bill, you might want to consider applying for a new credit card that has an introductory 0% APR offer for, say, 12 or 18 months. If you could put a $900 bill, or a $2,000 bill or some other insanely high medical bill on a card with an interest-free introductory period, that would help you pay off the bill more slowly without high interest charges.
You also might want to use a credit card that offers cash back when you pay off a medical bill. If you’re going to pay for something unpleasant or mundane like lab work at a doctor’s office, you might as well get some cash back or other rewards (assuming you have an intro 0% period to work with or can pay off the full balance right away; otherwise, the rewards won’t be worth as much as the interest you’ll pay and you’re better off considering a payment plan through your medical provider).
Which Credit Card Is Best for Medical Bills?
There isn’t one solitary credit card that’s necessarily the best for medical bills, but some are better than others, of course.
You may want to look into a credit card that …
- Offers a lengthy introductory 0% APR offer. Especially if it’s 12 to 18 months. Then you have some decent time to try and get the debt paid off, without it being made more expensive by interest. Even better if it’s a rewards card through which you can rack up rewards AND avoid paying interest for a time.
- Offers cash back. If you’re going to shell out $2,000 because your insurance wouldn’t pay for your entire operation, well, at least it would be nice if you received cash back in the process. Granted, 1% of $2,000 is only $20, and so you haven’t really beaten the system, but it’s better than nothing. Again, though, if you’re paying interest on the bill, the rewards won’t be worth it.
- Offers generous travel rewards. Why? Well, you’ve heard of medical tourism, right? Maybe you should have some big healthcare procedure done in another country, if you can get past the red tape. Or get your healthcare issues taken care of and then reward yourself with a vacation somewhere. You’ll have earned it.
How to Choose the Right Credit Card for Medical Expenses
If you’ve made the decision to use a credit card for medical expenses, you need to evaluate which card best suites your personal needs.
If you are planning to use the card only to pay off the medical bills and then tuck it into a drawer until the next emergency, look for a card that has no annual fee and one with an excellent 0% introductory offer. The longer the better, to give you as much time as possible to pay off that bill. Some type of cash-back rewards program would be a nice bonus.
On the other hand, you might decide to keep the card for regular use, and if that’s the case, you’ll want to take additional factors into consideration. You will want to look at the standard interest rate that will kick in after any introductory periods expire, as well as take a look at any rewards program that may be available. Do you prefer cash back or are you one who likes to accumulate points or miles to redeem for travel or merchandise? Consider whether the card has a points/miles plan, is easy to understand, and decide if it fits your spending habits so you can best take advantage of the perks available.
Read the fine print and take a look at the fees. Beyond the annual fee, a card might have a balance transfer fee, a cash advance fee, a late payment fee and a foreign transaction fee, to name a few. Some cards also have a penalty interest rate that kicks in if you are late on your payments.
Before applying for any card, know your credit score. If you have only a fair credit rating, it’s not worth your time (and can even be harmful) to apply for a card that requires good to excellent credit for approval.
In short, do your homework. Credit cards can be valuable tools when used right, but rash decisions have the potential to harm your financial stability.
WHAT IS A MEDICAL CREDIT CARD?
A medical credit card is usually thought of as a credit card solely designed for medical purposes. That is, they are marketed to hospitals and doctors’ offices and sometimes even veterinarians as a way to pay for patient care.
Usually, there is a period of time, maybe as much as 18 months, and maybe as little as six months, where you can make your payments – and if you pay it all off in the allotted time, you won’t have to pay any interest.
Is a Medical Credit Card Worth It?
Maybe. For some patients, it’s a godsend, no doubt it. The problem is when things don’t work out as planned. The deferred interest rate that these medical credit cards generally offer is a little like a ticking time bomb.
What do we mean? Well, let’s say you have gallbladder surgery, and your insurance doesn’t pay for it all, and so you’re stuck with, say, a $5,000 bill. You pay it with a medical credit card, and you pay it all off in the 0% APR interest-free window that they’ve given you. Then you paid off your healthcare bill with no interest. Good for you.
But if you don’t get the entire $5,000 paid off within the 6, 12 or 18 months you were given? You only paid off, say, $4,900? You have to pay interest retroactively on the entire $5,000 you borrowed.
That’s not the case with a conventional credit card that offers a 0% APR introductory period. If you fail to pay off the entire amount and wind up with $100 still remaining on your credit card, you’ll only pay interest on the remaining $100.
So that’s something to consider. Also, if you manage to pay a medical bill with a credit card that has a 0% APR introductory period – and offers some cash back, you’re going to make out even better. So using a medical credit card is far better than not getting a medical procedure done or doing something like taking out a high-interest loan at a payday loan store. But there are arguably better ways to pay for gallbladder surgery.
In most cases, though, if you’re just looking for a way to pay off your procedure or bill over time without paying interest and you don’t have a traditional credit card with a 0% offer, your best option will simply be to work with your provider to establish a payment plan directly.
A journalist for nearly 20 years, Brooklyn has published work on a broad range of topics including personal finance and business as well as travel and human interest pieces. As a finance expert, she has provided commentary on credit cards, card rewards and personal finance for outlets including Forbes, Fox Business and many others. Her own wanderlust and travel experiences...Read more
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