A California man was treated at a local ER for COVID-19 at a cost of $15,000. When the hospital realized he had no insurance, they signed him up for a medical loan—before, he says, checking to see if he was eligible for the hospital’s charitable care program.
In New York, a woman needing a $12,000 bone graft alleges she was signed up for a medical credit card by her dentist—who hadn’t checked first if she had insurance that would cover at least a portion of the cost—according to her attorney.
And in North Carolina, a state investigation highlighted a woman, with a $28,000 medical bill after multiple cancer treatments, who says that she was placed in a payment plan with a medical credit card. But after six years of making partial payments, she still owed nearly the full amount. The hospital has sued her for the balance.
These stories aren’t out of the ordinary. Nearly 100 million adult Americans carry some form of medical debt, according to figures from a 2022 Kaiser Family Foundation national survey. And more and more commonly, patients like the three above are being steered to financial products like high-interest credit cards or loans designed expressly to help pay for medical expenses. Applications for these cards and loans are often available at doctors’ offices or hospitals, according to the Consumer Financial Protection Bureau, which recently issued a report on the subject. In some cases patients report being signed up for these financial products without their knowledge or consent, the CFPB says.
While these forms of payment for medical care are not new, in the past people mostly used them to pay for elective procedures like cosmetic surgery. Today, the CFPB notes, medical credit cards and medical loans often take the place of interest-free installment payment plans hospitals and healthcare providers used to offer when bills for necessary care were more than the patient could afford all at once.
The largest of three major companies offering medical credit cards, CareCredit, a subsidiary of Synchrony Financial, says it has 11.7 million cardholders (up from 4.4 million cardholders a decade ago), and is now accepted at more than 250,000 healthcare providers—adding more than 70,000 in the last 10 years. Two other companies, Comenity, a subsidiary of Bread Financial, and Wells Fargo also offer medical credit cards. Companies that offer medical loans include AccessOne, Cherry, PatientFi, PayZen, Prosper Health Financing, PrimaHealth Credit, and Scratchpay.
Michelle Blaya Romero, a spokesperson for Synchrony, says that “CareCredit’s convenient and transparent financing options make health and wellness care more affordable and can be used to pay for a wide range of health and wellness items.” Itzik Cohen, CEO of PayZen, says, his company “leverages technology to tailor monthly, interest-free payment options to each patient’s ability to pay,” and that it tries “to solve healthcare affordability in a way that benefits both patients and providers.” And a spokesperson for AccessOne said that it “partners with healthcare providers to offer patients flexible, affordable financing options when they need them.”
The CFPB says that while these medical payment products can offer savings with zero-interest promotional rates, convenient payment plans, and administrative ease for medical providers, they have significant downsides. These include interest rates that can soar as high as 35 percent, costly penalties for late payments, damage to your credit, ineligibility for certain consumer protections, and loss of options for charitable care (see more below).
“Our research indicates that in many cases, patients who use these products end up worse off,” said Rohit Chopra, director of the CFPB in a statement on medical credit cards earlier this year. The CFPB report notes that patients in pain or struggling with illness, when presented with complex financial information, are often not in a position to make good financial decisions.
“Medical debt is overwhelming American households,” says Chuck Bell, a financial policy advocate at Consumer Reports. “And because high-cost, deferred interest credit cards present so much risk, consumers should steer clear of them wherever possible. Always ask what other payment options are available, and whether you can qualify for a lower-cost payment plan or hospital financial assistance.”
Here are some of the key ways using these financial products to pay for medical debt can get you in trouble, and advice about what you can do instead to relieve the burden of high medical costs.
Danger #1: You Could Be Hit With High Deferred Interest
The medical loans or credit cards many consumers sign up for at the doctor or dentist’s office often offer zero-interest promotional periods of 6, 12, or 18 months. But the CFPB says the fine print of these loans and credit cards, which can be tricky to decipher, often contain a caveat regarding what’s called deferred interest: If you don’t pay off the full amount before the end of the promotional period—even if the cause was a billing error—you’ll be on the hook for all the interest that would have accrued dating back to the original purchase date. “You could find yourself in a deep hole,” says Doug Aldeen, an attorney in private practice in Austin, Texas, who represents consumers and companies sued by large hospital and healthcare systems for nonpayment of medical debt.
Those interest rates can be very high: The average rate of a medical credit card is 27 percent, says the CFPB—higher than the typical 16 percent for general-purpose credit cards. The agency notes that at least one service, Upstart, which markets directly to patients, charges up to 35.99 percent.
The CFPB has received numerous complaints that even as consumers attempted to pay down their loans, deferred interest caused their total due to become greater than when they took the loan or credit extension.
That’s what happened to a consumer in Washington state, according to a complaint he filed with the CFPB in 2021 about a $3,600 loan with a promotional zero-interest period they received for a medical procedure. But the person didn’t realize their auto-pay was set to the minimum monthly payment amount. So after the promotional period ended, the amount due had ballooned to $4,600, the report said, even though the person had already paid $2,500. “I have not missed any payments,” the person wrote. “The only reminder I got about the offer expiring was the one [sentence] in the email . . . saying the promotion is expiring soon.”
Fees can also trigger the deferred interest to be charged. In 2019, a consumer in New York filed a complaint to the CFPB that even though they’d paid off the medical credit card in full during the promotional period, they were unaware that a fee was being repeatedly charged. That fee, which had gone unpaid, triggered at least $800 in deferred interest on the already-paid-off debt—an amount greater, the consumer said, than the original sum charged on the card. When the person phoned the company, they removed the fees but refused to remove the interest charge, saying the consumer should have known to review the account online.
What to do instead: Instead of charging the medical bill to a medical card, or taking out a medical loan, ask about an interest-free or low-interest payment plan directly from the medical provider, says April Kuehnhoff, senior attorney at the National Consumer Law Center who advocates for consumer financial rights in this area. Many providers still offer these, she says. If that doesn’t work, consider taking a personal loan from your bank or credit union—those with good credit are typically charged interest rates starting around 10 percent. If that isn’t an option, consider asking for a loan from a family member.
If asked for your credit card when receiving care in an emergency room, don’t provide it, says Aldeen. Emergency rooms are obligated by law to take measures to treat you regardless of your ability to pay. If you are insured, ask for the invoice to be sent to your insurance company; if uninsured, ask for it to be sent to you via snail mail, so you can think about your payment options or financial assistance in a less stressful setting
Danger #2: You Might Be Overcharged for Medical Services or Get Services You Don’t Need
The CFPB says medical credit card and loan companies promote their products to doctors as a way to “offer consumers additional or more expensive treatments.” In the case of the woman in New York who needed the bone graft, in the middle of the $12,000 procedure the dentist suggested he should also graft the other side of her jaw for an additional $4,000. She wasn’t able to fully evaluate whether the work was needed or not—they hadn’t discussed it ahead of time—but she felt pressured and so let the dentist do the second graft.
“No patient should be put in the position of having to make an expensive and serious financial decision in the middle of a procedure,” says Bell.
What to do instead: Always ask, “Do I really need this treatment, procedure, or test? And then seek a second opinion,” says CR’s Bell. You might find you don’t need the procedure at all. In fact, in a 2017 survey of 2,106 U.S. physicians and members of the American Medical Association, the doctors themselves estimated that about 20 percent of all medical care was “unnecessary”—and that was especially true for tests.
Danger #3: You Lose Important Consumer Protections
As of last year, the big three credit bureaus, Equifax, Experian, and TransUnion, said they would treat medical debt on credit reports with greater leniency than other forms of consumer debt, such as car or home loans. Specifically, any new, unpaid medical bills reported to the credit agencies won’t be added to a report for 12 months, compared with the standard 60 to 120 days for other types of debt. And as of earlier this year, unpaid medical bills of less than $500 will no longer be included in credit reports at all.
But if you charge a service on a medical credit card—or use a general-purpose credit card, for that matter—the credit bureaus won’t treat the debt any differently than other forms of consumer debt, says Kuehnhoff at NCLC. Should this debt go into collections, you won’t have any special protections.
More than a dozen states offer additional protections regarding medical debt according to a recent Commonwealth Fund report. For example, healthcare providers in New York and Maryland cannot put a lien on property; New York also forbids garnishing a person’s wages to pay off medical debt. North Carolina, New York, Pennsylvania, and Texas prohibit creditors from garnishing a person’s wages.
What to do instead: Take all steps to avoid charging medical debt to a credit card. In addition to asking about financial assistance and an interest-free payment plan, as outlined above, Aldeen says you can try to negotiate the bill and seek a prompt-pay discount for paying the lower amount in full if you do not qualify for financial assistance.
You should also make sure the bill is accurate to begin with. Ask for an itemized invoice, then review it for errors such as duplicate charges, which the CFPB says are extremely common. Then check the prices for each service to make sure you aren’t being overcharged. A recent client of Aldeen’s in Cedar Park, Texas, was socked with a $30,000 hospital bill after his insurer paid their portion, including $11,000 for a CT scan “when the actual charge should be more like $500, or less,” Aldeen says. (Aldeen was able to get the final bill dramatically reduced.) Find average prices for common medical tests and procedures in your area by using Fair Health’s lookup tool.
Danger #4: Charitable Assistance You May Be Eligible for Won’t Be Offered if You Charge Medical Debt or Take Out a Loan
Nonprofit hospitals are required to provide free or discounted care to certain patients based on income. But if you file a financial assistance application and the hospital’s accounting system shows you as having a zero balance because you already borrowed for or charged the debt to a credit card, the hospital might not process your request, says Eli Rushbanks, general counsel and director of policy advocacy at Dollar For, a nonprofit organization in Portland, Ore., that helps folks apply for charity care.
What to do instead: When confronted with a medical bill you can’t afford, always ask if there is a charitable program you can apply for. You can do this even if you’ve already borrowed the money or charged it. Jeffrey Alvarado, 31, an uninsured man in California, was treated in a hospital that failed to make him aware of its charitable program before they had him take out a medical loan for $14,000. With Rushbanks’ help he was able to get his debt forgiven and the medical loan terminated. Check out DollarFor.org to find out the details on how to apply for charitable or discount care with your specific hospital—they cover all 50 states and offer free help.
Danger #5: You May Wind Up Paying for Care Your Insurance Would Have Covered
In its report, the CFPB noted that medical credit cards and medical loans are sometimes pushed on patients so healthcare providers can avoid dealing with the insurance claims process and avoid the costs associated with collecting payments. In some cases, says CR’s Bell, that can mean providers won’t check in with your insurance ahead of time to determine what is or isn’t covered.
What to do instead: Before a test, procedure, or treatment is provided, check in with your insurer, if you have one, to determine if all or part of it is covered by your plan. You or someone at your doctor’s office can do this by phoning the number on the back of your insurance card. If the insurer refuses to cover procedures that aren’t elective or cosmetic, consider filing an appeal, says Kuehnhoff at NCLC.
If that fails, consider filing an appeal to your health plan’s external review board, says CR’s Bell. Directions on how to do that are typically provided with your denial notice. Your doctor should be able to help you. And if that physician or hospital won’t accommodate your financial needs, including working with your insurer, in the future consider looking for another provider who will, says Kuehnhoff.