If you're looking for a loan to help pay for an elective surgery
or emergency root canal, you won't have trouble finding
Applications for medical credit cards, which are designed to pay
exclusively for out-of-pocket health care costs, are ubiquitous at
specialty health care and veterinarian offices.
But be careful, say consumer advocates. Many health-care credit
cards remain fraught with risks, thanks, in part, to high interest
rates that can make the costs of a procedure balloon. (To compare
the terms on medical credit cards and loans, see CreditCards.com's
Health-care financing comparison chart
"A lot of times medical services are delivered in an emotionally
charged environment," says Mark Rukavina, founder of the
health-care consulting group, Community Health Advisors.
That can make for a risky backdrop when you're making important
financial decisions, he says -- especially if you're trying to
weigh quickly whether you can afford to repay a loan by the time an
interest-free promotion expires.
"Medical credit cards are probably most beneficial to people who
have the financial resources to manage and pay off those bills in a
very planned way," says Rukavina.
If you're already financially squeezed, however, a high-interest
card that promises an interest-free promotional period
upfront could just delay the pain, he says, and potentially create
deeper problems down the road. (For advice on what to do if you're
considering a medical credit card, see "
5 tips when comparing health-care credit cards
A controversial way to pay
Medical credit cards, such as those offered by CareCredit, Citibank
and Wells Fargo, have been courting controversy for years, sparking
investigations by state attorneys general and attracting sharp
criticism from consumer advocates who say the cards trap too many
consumers into high-interest debt.
In December 2013, for example, CareCredit was forced to refund
cardholders more than $34 million by the Consumer Financial
Protection Bureau after the consumer watchdog
CareCredit was enrolling customers without adequately explaining
Medical providers say the cards, which often promise long-term,
deferred-interest financing, help ensure patients get the treatment
they need, when they need it.
"The system has helped us deliver ideal treatments to patients
who are maybe in a less-than-ideal financial situation," says David
Rice, whose dental practice in Upstate New York offers the
CareCredit card. "We don't need to compromise their care because we
can spread out their financial obligations over time."
Patients can typically apply for the cards without leaving their
doctor's office and, in most cases, get an approval decision
Approval rates are high, according to marketing materials
intended for health-care professionals. So even consumers with
less-than-perfect credit may be able to qualify for an instant loan
when they need one. Some health-care lenders, such as American
Healthcare Lending, may even supplement traditional credit scores
with alternative data, such as checking account history, when
evaluating a patient's creditworthiness.
However, many consumer advocates remain skeptical, particularly
since the interest rates on most health-care credit cards after a
promotional deal expires are well over 20 percent.
"I would argue that there's great potential for abuse with
medical credit cards because of the way they're marketed by medical
professionals and because of the terms that are offered," says Gina
Calabrese, a law professor at St. John's University in New York
Calabrese points to the usury rate in New York State -- 25
percent -- as a benchmark to measure the medical cards' costs
"In New York State, it would be a crime to lend someone money at
a rate of 25 percent or higher," says Calabrese. Yet the standard
rates on two of the most widely available medical credit cards in
the United States range between 26.99 percent for the CareCredit
card and 29.98 percent for the Citi Health card. The rates are
legal: State usury laws such as New York's were long ago trumped
and rendered irrelevant by a
1978 Supreme Court decision that nationalized
credit card rates
All three of the medical credit cards available nationwide --
the CareCredit card, the Citi Health card and the Wells Fargo
Health Advantage card -- also offer interest-free promotional deals
that last from six to 24 months. "As long as you pay off that
procedure within that time, you won't incur any finance charges,"
"The problem is, people don't do that."
Depending on how much the original procedure cost, the
consequences of that decision can be steep.
Many health-care credit cards, including the CareCredit card,
deferred-interest credit cards
. A cardholder who fails to pay the full amount due by the time a
promotional period expires will be charged interest on the full
amount charged to the card, including the amount that's already
To consumers, that may feel like a retroactive rate increase,
which is banned under the
Credit CARD Act of 2009
. They're not hte same, says CareCredit spokewsoman Cristy
"There is no rate increase or change in the interest rate," says
Williams. "During the promotional period, the 26.99 percent APR is
applied to the balance subject to finance charges, but is
deferred," wrote Williams in an email. "The CARD Act did not ban
deferred interest promotional financing programs such as those
offered by CareCredit."
Trust undercuts consumer protections
Health-care providers have also come under fire in recent years for
offering the cards in place of more traditional payment plans.
Consumer advocates say that health-care providers' role in
connecting consumers to third-party creditors is worrisome,
particularly since many of the health-care providers who
participate in medical credit card programs only partner with one
brand and aren't subject to the same disclosure standards as
For example, health-care providers aren't covered by the
Truth in Lending Act
, which requires creditors to clearly disclose the terms of a loan
so that you can quickly understand how much you'll be charged and
compare those terms with other loans.
"The Truth in Lending Act applies to lenders. It doesn't apply
to people brokering loans," says Jim Hawkins, a professor of law at
the University of Houston.
Health-care providers also don't have to disclose why they are
partnering with a particular medical credit card provider or how
that relationship benefits their practice, says Hawkins. "The
doctor doesn't have to say 'I chose this credit product because
it's cheapest for me, not because it has the best terms for
you.'" CareCredit, for example,
pays dozens of professional medical societies
to market its health-care card.
Consumer advocates say that's troubling since some patients may
not realize that their health-care provider has other motivations
and may be persuaded to offer a particular card, even if there are
better lending options available.
"The Truth in Lending Act's principal goal is to facilitate
comparison shopping," says Jeff Sovern, a professor of law at St.
John's University. "It requires lenders to give consumers
information so the consumers can get the best deals for
However, if a health-care provider recommends just one lender
and the consumer signs an application without looking at other
options, that undercuts the process, says Sovern.
People may mistakenly assume that the credit card that the
doctor's office is recommending is the best on the market, and they
may not bother to comparison shop, he says.
"People inherently trust their doctors," says the University of
Houston's Hawkins. "In this area, that trust might lead people to
make decisions that they wouldn't otherwise make if they had better
Hawkins compares the process of applying for a loan at a
doctor's office to buying a car. "When you go to the car
dealership, you know you're about to get ripped off," says Hawkins.
You have your guard up, so you're more likely to watch out for red
flags. However, "when you go to the doctor's, you're not thinking
'I need to question whether or not their advice is right.'"
In addition, Hawkins says, some consumers may not even realize
that they're taking out a loan from a third party and may assume
that it's their doctor's office that's offering the loan.
Hawkins cites his own experience in 2009. While studying
fertility financing for
that was eventually published in the Tulane Law Review, Hawkins
visited the websites of numerous fertility clinics across the US
and became confused by the language on some providers' sites. "For
some, I mistakenly thought the doctor was offering the credit until
I talked to someone in the clinic," says Hawkins. The third-party
relationship wasn't made clear, he says.
A loyal following for some health-care credit cards
David Rice, a dentist in New York whose practice offers the
CareCredit card, says that there may indeed be some health-care
providers who take advantage of the program and unduly pressure
people into taking out loans they can't afford.
Focusing on a few bad apples is misguided, he says. "There was a
period when CareCredit was specifically attacked in the news
because people felt like doctors were taking advantage of
patients," says Rice. "My retort to that is, in every profession
out there, there are excellent people, there are good people and
there are bad people and those bad people will always find a way to
abuse what's brought to the table."
"It's rarely a piece of technology or a system that's bad," he
adds. "It's almost always the people who are good or bad."
Rice says that his staff takes pains to make sure patients
understand the terms of the card and realize that that the card is
being offered by a third-party financier.
"They spend a lot of time with that patient to let them know
that they need to have that [loan] paid in full before the date is
due or the interest rate will be very, very substantial for them,"
he says. "We want people to be very well aware of what the terms
Rice says that some health-care providers who haven't properly
disclosed the terms to consumers may simply have run out of time.
"My feeling is that time is everybody's worst enemy," says Rice.
"In many health-care environments, the medical office or the dental
office doesn't spend enough time to have their patient fully
understand what they're agreeing to." And that's too bad, he says.
"It's a wonderful opportunity for people so long as they understand
what they're saying yes to."
Many consumers agree. CareCredit, in particular, has attracted a
devoted following among some cardholders thanks to its
interest-free promotions that can last as long as two years.
"I've been an advocate ever since I had it," says Jennifer Diliz
of Miami Lakes, Fla., who used her CareCredit card to finance
surgery for both her and her dog. "It helps keep you on budget and
[you don't have to] pay more than it would have originally cost
you," she says, referring to the interest-free promotion.
"I haven't had a lick of problems with them," adds Ingrid
Kast-Fuller of Pasadena, Texas, who used her CareCredit card for
"We could have put it on a Discover, or another credit card, but
at the time, we didn't have any that were promos," says
Kast-Fuller. "That was the big issue ... we had the chance to put
it on zero interest as opposed to putting it on a regular credit
card and having to pay [interest]."
Seek help for unexpected medical bills
Do medical bills show up on credit reports?
New medical FICO score sparks controversy,