Generally speaking, charging medical expenses to a credit card is a poor financial choice. Is there any circumstance in which it makes sense to pay medical expenses with your credit card? Here’s what you should know before you do.
- It seldom makes sense to turn medical debt into credit card debt.
- Only pay for your medical bills with a credit card if you can pay off your credit card bill in full or take advantage of 0% APR periods and credit card rewards.
- Seek credit card relief if you’ve already accrued heavy credit card debt for medical expenses.
According to a survey by Salary Finance, 32% of all working Americans have outstanding medical debt, and 54% of people with medical debt have defaulted on it. Further, 28% of those with outstanding medical debt owe $10,000 or more on their bills and 40% of adults struggling to pay medical debt report that their credit rating has suffered because of it.
When faced with unexpected medical expenses, many people resort to using credit cards, even when doing so may put them in a precarious financial situation. Generally speaking, charging medical expenses to a credit card is a poor financial choice. Is there any circumstance in which it makes sense to pay medical expenses with your credit card?
Here’s what you should know before you do.
Using Your Credit Card for Medical Bills
Before you think about whipping out a credit card to pay for your medical bills, you have to be aware of the following.
- Using a credit card for medical bills is financially feasible if you will be able to pay off the resulting balance in full on your next credit card bill.
- Medical debt is different from consumer debt, in the sense that it does not show up on your credit report right away. According to Experian, even if your medical bill gets turned over to a collections agency, the three main credit bureaus will give you a 180-day waiting period to resolve any medical debt before the collection account shows up on your credit history. By contrast, credit card debt shows up on your credit report in as little as one month.
- Medical credit cards may offer generous 0% APR periods lasting 12 to 24 months. Such cards carry deferred interest, however. If you have a balance on such an account when the 0% APR period expires, the deferred interest piles on top of your balance, defeating all the value you thought you had secured.
The bottom line: Only turn medical debt into credit card debt if you have a solid reason to do so, and it makes mathematical sense.
When Does Turning Medical Debt into Credit Card Debt Make Sense?
Here are some situations in which it may make sense to charge medical expenses to a credit card:
- If you know you have the money to pay off your credit card bill in full, you may want to use a rewards credit card to pay your medical bill. Medical bills are usually hefty. By paying them off with a rewards card, you can rack up significant points, miles, or cash rewards.
- If you have a credit card with a generous 0% APR introductory period, you can use it to avoid paying any interest on your medical debt. Only resort to this solution if you are absolutely certain you can pay off your balance before the promotional period ends.
- By using a credit card to pay off your medical debt, you can build up your payment history. Again, such an approach only makes sense if you can pay off your bill without carrying a balance.
- Credit cards are convenient. In the middle of a medical emergency, you may not have access to cash or your checkbook. In such cases, it makes sense to use a credit card, but only if you can avoid going into debt and incurring interest.
A word of caution: Keep your eyes on your credit utilization ratio at all times. Paying off a large medical bill with a credit card may upset this ratio and affect your credit score.
Some Tips for Handling Medical Debt
Since paying your medical bills with a credit card is always a bad idea if it results in credit card debt, what should you do about medical debt? Here are some tips:
- Always check your medical bills for errors.
- Negotiate your bills with your healthcare provider.
- Work out a payment plan.
- Make sure your healthcare provider codes your bill optimally for your insurance company.
- Research loan options with low-interest rates in the unusual event that your healthcare provider will not work with you to create a payment plan. Try to stay away from secured loans.
Credit Card Relief Solutions
If you have already charged medical expenses to a credit card and have credit card debt that you are struggling to handle, seek credit card relief. Contact a ClearOne Certified Debt Specialist at 866-481-1597 to learn what your credit card relief options are and get a free savings estimate.
The information provided is for informational purposes only and is not intended to provide legal or financial advice. Clear One Advantage is not a lender, credit repair or consumer credit counseling company. Clear One Advantage doesn’t provide credit advice. Please consult a certified financial advisor for individual credit and lending advice.