Credit Cards

The Lure, and Risk, of Medical Credit Cards

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For Alan Tebby, a chiropractor in Charlotte, N.C., signing his patients up for medical credit cards just makes sense.

“It’s a win-win for everybody,” Tebby says. “The patients get the services they need, and I get to focus on giving medical care instead of being a collections agency.”

But for an elderly woman in Minnesota, using a medical credit card meant paying $1,200 in interest on a single hearing aid, according to a report the Minnesota Attorney General’s office. And a man in Williamsville, New York paid cash for dental work, but was signed up anyway for a CareCredit card and was charged $9,000, with interest, according to a press release from the New York Attorney General’s office. State regulators in Minnesota and New York have launched investigations into doctors allegedly signing patients up for medical credit cards without the patients’ knowledge, saddling people with high interest rates on payments they didn’t know about.

Medical credit cards have been around for years. Like most credit cards, they allow people to make purchases up-front and pay for them over time. Unlike regular cards, however, medical credit cards can only be used to pay medical providers including surgeons and chiropractors (and, in some cases, veterinarians).

Medical debt on the rise

As the cost of health care grows, and average American incomes stagnate, the use of medical credit cards is on the rise. Consumers charged about $45 billion worth of medical costs with credit cards in 2008, and that could more than triple to $150 billion by 2015, according to a report by McKinsey & Co., a consulting firm.

For people who can afford to pay off their bills every month, that may be a good thing. But for others who are accustomed to not paying their credit card balances in full every month, medical credit cards could spell disaster. That’s because one missed payment or underpayment on a medical credit card causes the interest rate to skyrocket to almost 30%, much higher than most credit cards, and potentially locking low- and moderate-income people into a never-ending cycle of debt.

“Health care debt is the number one cause of individual bankruptcy, and this scheme is contributing to the economic burden being felt by consumers,” Andrew Cuomo, then the attorney general of New York and soon to be the state’s governor, said in August.

More than 50 million Americans have no health insurance, according to a study by the U.S. Centers for Disease Control. People who do have insurance are often paying higher deductibles and co-pays to get the treatment they need. The average family with medical debts owes $11,612, compared to $8,110 in debt for families with no medical bills to pay off, according to a study by The Access Project, a nonprofit group that investigates medical debt.

As a result, medical debt is on the rise. At least 62% of bankruptcies in the U.S. in 2007 were caused by medical debt, according to a study published last year in the American Journal of Medicine. Of those, 92% of the bankruptcy filers owed medical debts above $5,000. “Most medical debtors were well educated, owned homes, and had middle-class occupations,” the study found. “Three quarters had health insurance.”

Help, or a trap?

Image: Adrian Clark, via

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