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Medical credit cards under fire

By Leslie McFadden · Bankrate.com
Wednesday, August 11, 2010
Posted: 2 pm ET

Credit cards designed specifically to finance dental, health care and even veterinary expenses have come under recent investigation by New York Attorney General Andrew Cuomo. Last week, Cuomo subpoenaed 10 dental and health care providers that promote the CareCredit from GE Money, and this week four more providers were ordered to provide information about their practices. GE Money's CareCredit, Chase Health Advance and Citibank Health Card have also been subpoenaed.

According to a statement on the attorney general's website, his investigation revealed that some medical providers use "fast-talking" sales pitches to get consumers to apply for the high-interest cards. It also found that CareCredit pays kickbacks to providers based on the amounts consumers charge to the cards.

Cuomo's office has received hundreds of complaints in recent years from consumers who say they have been deceived into applying for and using the cards. Some consumers complained that their health care provider told them the card had "no interest," when in fact, an interest rate typically north of 25 percent would apply retroactively from the date of purchase if the debt wasn't paid in full by the end of the promotional period. Consumers say they were also charged upfront for services that were never performed, and their attempts to get a refund were refused or ignored.

"Health care debt is the number one cause of individual bankruptcy, and this scheme is contributing to the economic burden being felt by consumers," Attorney General Cuomo said.

The dangers of medical credit cards

You may ask, don't medical credit cards help people finance out-of-pocket health care expenses?

Sure. If you're on a no-interest plan and pay in full during the special financing period, you can pay for a procedure over time and avoid finance charges. For instance, CareCredit offers promotional plans where no interest is charged if the balance is paid off within the promotional period, which runs anywhere from six months to two years long.

If you miss a payment or carry a balance past the promotional period, then the plan gets a lot more expensive. CareCredit explains that "interest will be charged to your account from the purchase date if the promotional balance, including optional charges, is not paid in full within six, 12, 18 or 24 months or if you make a late payment." At that point, you face either the purchase APR of 26.99 percent, or the penalty APR of 29.99 percent. Ouch.

It's a sober reminder to always read the fine print and compare credit card offers before applying.

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2 Comments
homeless now
August 12, 2010 at 5:42 pm

I had a Care Credit Card. Near the end of the promotional period I applied for a different card with a low balance transfer apr, and transfered the balance to avoid the 29.99% apr on the expensive emergency that this card was supposed to "help" me through. As a result of trying to keep up with the promotional offer, I really put myself in a hole with cash flow.