Hailey Tran
CareCredit is a credit card designed to support health and wellness expenses. It is accepted at over 270,000 healthcare providers nationwide, including hospitals, urgent care centers, and health systems. However, not all hospitals accept CareCredit, and it is important to check with your specific hospital to see if they are in the CareCredit network. CareCredit offers special financing options for healthcare services for the cardholder, their family, and even their pets. While CareCredit can provide flexibility in paying for medical expenses, it is important to consider the potential risks, such as high-interest rates and costly penalties for late payments.
| Characteristics | Values |
|---|---|
| High-interest rates | Interest rates can be as high as 35% |
| Costly late payment penalties | Charged interest on the entire amount borrowed if not paid in the agreed timeframe |
| Damage to credit score | Failure to pay bills on time can hurt credit score |
| Ineligibility for consumer protections | Not eligible for certain consumer protections |
| Loss of options for charitable care | Hospitals might not process charitable care requests if the patient has already borrowed for or charged debt to a credit card |
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What You'll Learn
- High-interest rates and costly penalties for late payments
- Hospitals may not process charitable care requests if you've already borrowed
- Medical credit cards and loans are often used in place of interest-free plans
- Patients may be signed up for cards or loans without their knowledge or consent
- Hospitals may sue for payment or sell your debt to a collection company
High-interest rates and costly penalties for late payments
Medical credit cards and loans are increasingly being used to pay for medical care. However, these cards and loans often come with high-interest rates that can soar as high as 35%. This means that patients who are already struggling with illness or complex financial information may end up worse off financially. In addition, late payments can result in costly penalties, further damaging the patient's financial situation.
For example, a patient with a $28,000 medical bill from cancer treatments was placed on a payment plan with a medical credit card. Similarly, a California man treated for COVID-19 at a cost of $15,000 was signed up for a medical loan without being informed of the hospital's charitable care program. These cases highlight how patients can be steered towards high-interest credit cards or loans without exploring alternative options.
Nonprofit hospitals are required to provide free or discounted care to eligible patients based on income. However, if a patient borrows money or charges debt to a credit card, the hospital may not process their request for financial assistance. This can result in the patient being burdened with high-interest debt from their medical credit card or loan.
To avoid the risks associated with high-interest rates and costly penalties, patients should explore alternative options before turning to medical credit cards or loans. Hospitals may offer financial assistance programs, no-interest repayment plans, or discounted rates for eligible individuals. It is important for patients to understand their financial options and make informed decisions to avoid worsening their financial situation.
In summary, high-interest rates and costly penalties for late payments on medical credit cards and loans can create significant financial burden for patients. It is crucial for patients to be aware of their rights and alternative options before signing up for these financial products. Hospitals should also ensure that patients are informed about charitable care programs and other forms of financial assistance to prevent patients from taking on unnecessary debt.
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Hospitals may not process charitable care requests if you've already borrowed
Hospitals may not process charitable care requests if patients have already borrowed from a third party or signed up for a medical credit card. This is because hospitals are incentivized to avoid dealing with insurance claims and the costs associated with collecting payments. In some cases, providers won't check in with a patient's insurance ahead of time to determine what is or isn't covered. This can result in patients taking on debt that they otherwise wouldn't have incurred.
Non-profit hospitals are required to have financial assistance policies, but which patients qualify and how much assistance they receive is largely left to the hospitals' discretion. This has led to significant variation in policies by state and hospital, with some hospitals offering more limited assistance than others. Some hospitals may not offer assistance to patients who have already signed up for a medical credit card, while others may not provide assistance if patients have already paid their medical bills.
The application process for financial assistance can also be burdensome, resulting in few patients completing it and receiving assistance. Hospitals may use third-party software to make initial decisions about eligibility, but this software often employs inaccurate third-party data and is optimized to increase revenue. As a result, eligible patients may be denied assistance if an algorithm predicts they are likely to pay, shifting the burden onto the patient to prove their eligibility.
In addition to charitable care, hospitals may offer other forms of financial assistance to help patients cover the cost of medical treatment. These include interest-free installment payment plans, medical credit cards, and medical loans. However, using credit to pay medical bills can be risky, with interest rates as high as 35% and costly penalties for late payments. Patients who use these products may end up worse off, with damage to their credit and loss of options for charitable care.
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Medical credit cards and loans are often used in place of interest-free plans
The largest company offering medical credit cards is CareCredit, with 11.7 million cardholders and acceptance at over 250,000 healthcare providers. CareCredit offers promotional financing options that allow users to pay for health and wellness costs over time. Other companies offering medical credit cards include Comenity and Wells Fargo. Companies offering medical loans include AccessOne, Cherry, PatientFi, PayZen, and Scratchpay, among others.
Medical credit cards and loans can be risky due to high-interest rates, costly late payment penalties, and potential damage to one's credit. Interest rates can reach above 25%, and in some cases, as high as 35%. Additionally, patients in pain or struggling with illness may not be in the right state of mind to make complex financial decisions, and they may end up worse off financially. Furthermore, if an individual borrows money or uses a credit card to pay for medical expenses, a hospital might not process their request for financial assistance, as their accounting system may show a zero balance.
It is important to consider other payment options before resorting to medical credit cards or loans. These options include interest-free or low-interest payment plans directly from the medical provider, applying for a charitable care program, or exploring alternative financing options with one's bank or credit union.
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Patients may be signed up for cards or loans without their knowledge or consent
In some cases, hospitals may sign patients up for medical loans without first checking if they are eligible for charitable care programs. For example, an uninsured man in California was treated in a hospital and was signed up for a $14,000 medical loan before being made aware of the hospital's charitable program. Similarly, a woman in New York needing a $12,000 bone graft was signed up for a medical credit card by her dentist, who did not check if her insurance could cover the cost. These cases are not uncommon, and patients can often end up worse off financially as a result.
The Consumer Financial Protection Bureau (CFPB) has issued a report on this issue, noting that patients in pain or struggling with illness are often not in a position to make good financial decisions when presented with complex financial information. The CFPB also highlights that healthcare providers may be disincentivized to explain legally mandated financial assistance programs or zero-interest repayment options before offering these products to patients. This can result in patients being burdened with ballooning deferred interest or creditor lawsuits.
Additionally, medical payment product issuers may offer incentives to healthcare providers to promote their products, such as a share of the revenue or lower processing fees for enrolling high numbers of patients. This further encourages providers to recommend these financial products to patients without fully explaining the risks and alternatives. It is important for patients to be aware of their options and to ask about other payment plans or financial assistance programs before signing up for medical credit cards or loans.
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Hospitals may sue for payment or sell your debt to a collection company
Medical debt is a unique form of debt that arises from a visit or interaction with a healthcare provider, such as a hospital, clinic, doctor, or nurse. Two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an acute medical need. Unlike other types of debt, consumers rarely plan to take on medical debt. For example, an individual might get into a car accident and end up in an emergency room. They are treated and released without paying a bill. Then, much later, they receive a collections call, and they have no documentation to defend their case.
Medical debt is the most common collection type reported on consumer credit records, and consumers report being contacted by debt collectors about medical debt more than any other type of debt. Medical debt collections on a credit report can impact your ability to buy or rent a home, raise the price you pay for a car or insurance, and make it more difficult to find a job.
If you are unable to pay your medical bill, the provider can sue you for payment or sell your debt to a collection company. If you fail to pay your bills, it can also hurt your credit score. However, some states have laws that prohibit healthcare providers from using certain collection practices against patients to collect unpaid medical bills.
If you are having trouble with a debt collector, you may file a complaint with the Consumer Financial Protection Board (CFPB). The collection company has two weeks to respond to your complaint before it is made public in the CFPB’s database. Filing a complaint with the CFPB helps in two ways: it may lead to a swift solution, and it builds up a record of the type of abuse and the specific companies prone to behave badly.
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