Can you handle a medical credit card?

When does a medical credit card make sense?

When I was 18, I got a credit card for my cat.

Remy had worms, and the vet’s office said there was a medical credit card from a company called CareCredit that would let me split the bill into payments I could handle, with something called “deferred interest” so I wouldn’t have to pay extra. I signed up.

I remember telling my dad what I’d done, and he just tilted his head and looked at me over the top of his glasses. “We’re not going to bail you out if you get into trouble,” he said. These cards are known for their risks, which range from steep interest rates to punishing late penalties. Just yesterday, CBS MoneyWatch warned about all the ways they can go wrong.

But 18-year-olds know everything, so I “knew” I was doing something smart — taking care of my cat and establishing a credit history at the same time.

And it worked out fine for me.  I paid off the bill (about $500, from what I remember) in less than six months, which is when the interest rate would have kicked in retroactively for the entire balance. Let’s pretend I knew that in advance.

Lesson learned? Yes, but not the one you expect. Now I’m 35, and I just told my husband it was OK to get a credit card specifically for his dental bills. Remember, I knew everything at 18, so by now I should know twice as much of everything.

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Why medical credit cards work for us

My husband has a broken tooth from crunching on an almond and has been getting anxious calls from the dental office every few days for the past two weeks urging him to make an appointment to fix it. I finally told him about the medical credit card option, and he was offered one with a $2,000 limit.

This option still made sense for us, but may not for everyone. The good thing about medical credit cards is the ability to divide a big unexpected bill into monthly payments and avoid paying interest.

Using a medical credit card as a payment plan also beats procrastinating and then needing costlier care later. If your tooth is broken and you ignore fixing it, instead of a $900 cap now, you’ll need a $2000 root canal later. Anyone who’s had a root canal knows it’s painful. You’ll agree to any terms and interest rates when you’re blinded with pain.

So $900 is what my husband plans to pay for this fix, which means we could reasonably assume to pay $150 per month through the six-month, no-interest financing period. (Different cards have different no-interest periods, sometimes as long as two years.)

We know we can handle that. But you have to be sure you can — because if he misses a payment completely for any reason, then we could be in trouble.

Why many people fear medical credit cards

If my husband misses a payment, he’d instantly lose the no-interest option and get charged a $35 late payment fee. From there, the bill could spiral out of control.

If he makes the $150 payments for five month  but can’t afford the full final $150 payment, he’d have to pay all the accrued interest over the entire six-month period. That’s unlike a regular credit card, which usually only charges interest based on the remaining balance. It’s more like a store credit card.

The annual interest rate on my husband’s card is 27 percent, and being suddenly hit with six months’ interest at that rate means nearly a whole extra payment. It also means the interest could keep piling up if we haven’t fixed what made us come up short in the first place.

What to do if you’re considering one

My husband and I have now used these cards (and something similar for auto repairs) multiple times. Before you commit to a medical credit card, here’s my advice…

1. Treat them as a necessary evil. Consider carefully what you need and what you want. An example of a need is to fix a broken tooth, avoiding further problems with more expensive solutions. Cosmetic procedures? Not so much.

2. Do the math before you commit. Break up the payments mentally and see if you can handle them. If you know you can’t afford to pay an additional $100 a month and ultimately pay the balance off before interest kicks in, don’t use a medical credit card.

3. Look for better options. Other credit cards have lower interest rates, and you could possibly take out a personal loan with better terms. If you have at least average credit, you probably have alternatives to medical credit cards.

4. Compare notes with the card company and your doctor’s office. A final word of caution: Know ahead of time what a particular medical credit card allows at your particular doctor. They’re not always consistent. When my husband went to schedule his dental appointment and charge the $900, the provider explained the no-interest option wasn’t available at that office.

Instead, they had a 14 percent interest rate. We had a better option to finance this particular bill. Her name is Mom, and she only charges interest in the form of “I-told-you-so” advice.

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