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Should you get a medical credit card?

By , CardRatings Contributor

When my daughter decided to be born on January 2nd, the bill for her delivery and hospital stay made quick work of our annual health insurance deductible.

Facing a bill of several thousand dollars, I called the hospital to make payment arrangements and was surprised to learn my options were "pay it now" or "pay it over three months." Since that really didn't do much to break down the bill into manageable chunks, the customer service rep decided to reveal what was behind door number three: a medical credit card.

Basics of medical credit cards

In the wake of rising health care costs, medical credit cards can be a blessing or a curse. Typically offered through doctor, dentist or other health care professional offices, these specialty cards can offer interest-deferred introductory periods and a simple application process.

However, if the balance is not paid off during the introductory period, the cardholder may find themselves facing an interest rate of up to 26 percent or more. In addition, some cards may tack on interest calculated all the way back to the opening of the account. Both can make an already high medical bill all that much more astronomical.

NY Attorney General targets medical credit cards

Medical credit cards seem to cater to a captive audience: those with high bills and limited options. With these consumers perhaps feeling their back is to the wall, so to speak, they may feel they have no choice but to accept the medical credit cards offered to them. However, some public officials are now expressing concern with the way these cards are marketed and administered.

In July, the New York Attorney General reached an agreement with GE Capital Retail Bank and its subsidiary CareCredit LLC regarding their business practices. Under the agreement, the companies will implement, among others, the following changes.

  • Wait three days after the initial application before processing transactions of more than $1,000
  • Ban charges for services not rendered
  • Call consumers within 48 to 72 hours after the application is submitted to confirm it and any charges
  • Eliminate any rebates or compensation for health care providers who generate business for CareCredit

The NY Attorney General office indicates 65 percent of CareCredit applications are completed in provider offices. These new provisions are intended to ensure consumers have an opportunity to fully consider their options rather than make a rash decision when confronted with a receptionist expecting payment.

While the New York agreement may benefit customers in that state, patients in other states may not receive the same consideration from medical credit cards doing business there.

Is a medical credit card right for you?

Medical credit cards can be a convenient option, but they may not be the right choice in all situations.

Before signing up for a medical credit card, consider whether you have another, existing card that can be used. If you already have a zero-percent introductory interest credit card, it may be just as easy and convenient to use that rather than open a new account.

In addition, consider whether you can pay off the medical credit card within the allotted time. If not, you may be better off using a low-interest credit card that won't retroactively apply accrued interest. Even better, use a cash-back credit card to earn a rebate on those high health care bills.

Medical credit cards can be a useful tool for those faced with unexpected hospital and doctor bills, but as with other credit decisions, do your homework before agreeing to take on a new monthly payment.

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