Health challenges are stressful enough without adding financial troubles to the mix.
About 1 in 4 Americans said they have struggled to pay medical bills in the past year, according to a January 2016 Kaiser/New York Times survey. If you are among them, charging the balance to a credit card may seem like the perfect quick fix to get medical providers off your back.
But making such a move can not only cost you money, it can also wreak havoc on your credit and your overall financial well-being.
It benefits medical providers to get as much money upfront as possible, so a provider might strongly suggest a customer pay the entire bill quickly using a credit card rather than explain more favorable payment options, says Lisa Zamosky, a health care journalist and author of “Healthcare, Insurance and You: The Savvy Consumer's Guide.”
If you appear to be reluctant to offer up a card, medical personnel may suggest opening a medical credit card or paying the balance directly from your checking account. That’s when you need to be firm and just ask for the bill, especially if you’re in a high-stress medical situation, such as in the emergency room or in the middle of some other unplanned medical visit, and not thinking clearly.
And if your medical procedure is planned, do your research and know how you’re going to deal with your portion of the bill before you move forward.
Whether a high-deductible plan has you paying out of pocket or you’re considering an elective procedure that isn’t covered by insurance, here’s why credit cards should be your last option rather than your first:
1. Credit cards typically charge higher interest.
Many medical providers offer no-interest or low-interest payment plans if you can’t pay the entire balance at once. Compare that to the average credit card interest rate of 15.36 percent, according to our Weekly Rate Report.
While some might argue that a 0 percent interest promotional credit card could save you just as much money, there’s the chance that you won’t pay off the entire balance before the introductory period ends. “Then a year down the road you're stuck paying interest on a balance that is not paid off,” says Thomas Nitzsche, a spokesman for Atlanta-based ClearPoint Credit Counseling Solutions.
2. You may use up available credit needlessly.
One of the major factors in your credit score is your credit utilization ratio, which is the amount owed to available credit on each account and across all your credit accounts. The thinking is that if you’re using a high percentage of your available credit, you may be overextended, and hence, a credit risk. If you put a large medical bill on a credit card, you will be using up a larger percentage of your available credit, which could factor negatively into your score.
However, payment plans with medical providers typically aren’t reported to credit bureaus unless they end up in collections, says Can Arkali, principal scientist for analytics and scores at FICO. So if you make your payments on time, your medical bills are unlikely to ever factor into your score. You’ll also have more credit available in case other emergencies come up.
3. Credit card debt may cause more harm to your credit score.
Sometimes consumers have every intention of paying off a medical debt, but they simply can’t. Eventually, those unpaid medical bills could end up in collection, reported to a credit bureau and factor into your credit score.
However, with the advent of FICO 9, the version of the FICO scoring algorithm introduced in 2014, unpaid medical debts have a smaller impact than nonmedical debts, says Arkali. In fact, FICO found that the median score for consumers whose only major credit blemish is a medical collection is 25 points higher now that FICO puts less weight on medical debt than in previous versions of the score, Arkali adds.
So if you had to choose between having medical debt in collections and credit card debt in collections, your score would likely be hurt more by the credit card debt.
4. You may forgo discounts or financial aid.
Putting your medical bill on a credit card may be the fastest way to end interactions with your medical provider, but you might benefit from spending more time weighing other options. Many hospitals offer financial aid to those who need it or to a certain percentage of their clients, Nitzsche says. Other medical providers might offer discounts.
“A patient might ask about a ‘prompt pay’ discount if the patient is in a position to pay the balance in full within a period of time specified by the facility,” says Candice Butcher, vice president of Medical Billing Advocates of America. “Some facilities offer an ‘uninsured discount’ to those who do not have health insurance. In some situations, the patient might be able to receive both types of discounts.”
5. Credit cards may give you less friendly terms.
Cost isn’t the only thing that’s negotiable. Sometimes medical providers will be willing to give you more time to pay a medical bill. That’s what happened to Nitzsche when he had a medical procedure that left him with a hefty bill. When he asked if any assistance was available, the provider allowed him to extend the repayment schedule from 12 to 24 months at zero interest.
“Just by them pushing it out that far it can make the monthly payment a lot more affordable,” he adds. On the other hand, credit card issuers may not be as flexible, with many setting minimum payments of 1 percent of the balance, plus the current statement’s interest charges.
Of course, if you have the cash to cover putting medical expenses on a card and can delete any balance quickly, then feel free to hand over your plastic.
The bottom line: When possible, do your research before any medical procedure. “Most hospitals or providers aren't going to advertise financial aid. They're not going to advertise extended repayment plans. They're going to want all their balance upfront,” Nitzsche says. “You really do have to educate yourself and understand what's available before you make a decision.”
The next time a medical provider asks how you’d like to pay, don’t offer your credit card willy-nilly. Know your payment options beforehand, if possible, and if not, keep your credit cards tucked in your wallet until you do know what those options are.
Editor's note: This story, "5 reasons not to put medical bills on credit cards" was originally posted on CreditCards.com.