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Wednesday, September 8, 2010

Think twice before you swipe that credit card

Elisabeth Rodman

Staff Writer

Due to high health care costs and tight budgets, many uninsured and underinsured Americans have turned to health care-specific credit cards to finance their medical treatments. Health care credit cards with “promotional financing” are advertised as economical ways to pay for services that may not be covered by your health insurance, such as vision, hearing, cosmetic, and dentistry services. With health care credit cards, you can even pay for your pet’s medical needs. So you may be wondering: What’s the problem with that?

I will tell you why I—along with New York Attorney General Andrew M. Cuomo, Minnesota Attorney General Lori Swanson, and others—am skeptical of the benefits of health care credit cards.

1)     Interest-free promotions do not last. Health care credit card companies advertise a 0% interest rate (APR) for three, six, 12, 18, and even 24 months. If you can pay your entire bill in full within the promotional period, you may be safe from paying extra in late fees and high interest rates. However, if you miss a payment or submit your payment a few days late, your “interest-free” promotion will quickly disappear, and you will be faced with an interest rate of 24.99% to 29.99%.

2)     Slogans such as “Treatments today. Payments tomorrow.” promote medical debt. According to a 2007 study by Harvard and Ohio University researchers, the majority (62%) of personal bankruptcy cases are due to medical debt. Unlike a new computer or a pair of pants, you cannot return a root canal or an eye exam if, in the future, you do not have the money to pay for it. If you cannot pay your health care credit card bills on time, you will pay even more in high interest rates and late fees. This cycle of endless payments can be financially devastating.  

3)     The Double Play: No treatment and no money. Health care providers can go out of business, leaving you stuck on a payment plan for a procedure you never had. Health care credit card companies usually pay providers within 48 hours of when a charge was made. If you are scheduled to have a procedure in a few weeks or months, and your doctor goes out of practice in the meantime, you may go broke paying for a medical procedure you will never have.

New York Attorney General Andrew Cuomo’s investigation into health care credit cards, including GE Money’s CareCredit, Chase Health Advance, and Citi Health, was sparked by hundreds of consumer complaints. Vulnerable patients were often unaware that they were signing up for credit cards, let alone credit cards with high interest rates and large late fees.

Many are praising Attorney General Cuomo for making sure that health care lending practices do not go unnoticed. Chuck Bell of Consumers Union recently stated: “Attorney General Cuomo’s investigation shines a badly-needed spotlight on deceptive practices used to market health care credit cards to elderly and low-income consumers.” Catherine Dunham of The Access Project noted: “Attorney General Cuomo’s investigation into health care credit cards will help protect millions of patients across the country who are struggling with debt.”

The moral of the story: Explore your options before paying with plastic. Save yourself from medical debt.