Using Credit Cards for Medical Expenses: Pros, Cons, and Strategies

When Using a Credit Card Makes Sense

Medical bills are one of the leading causes of debt in the United States, and putting them on a credit card is a common strategy. If you have a credit card with a 0% introductory APR offer, charging medical expenses can give you 12 to 21 months to pay them off interest-free.

Using a credit card for medical expenses also provides consumer protections that direct payment does not offer. Under the Fair Credit Billing Act, you can dispute charges on your credit card if there is a billing error or the service was not provided as promised.

Credit card rewards are another consideration. If you can pay off the balance before interest accrues, you earn rewards on what might be a substantial expense. Some people have earned hundreds of dollars in cash back or points by strategically using rewards credit cards.

When to Avoid Credit Cards for Medical Bills

If you cannot pay off the balance within the promotional period, credit card interest rates of 20% to 30% APR make this a very expensive option. Medical providers often offer interest-free payment plans that can be more affordable than credit card financing.

Large medical charges can also push your credit utilization ratio above the recommended 30% threshold, which will temporarily lower your credit score. If you are planning to apply for a mortgage or auto loan in the near future, this could complicate your application.

Some medical providers offer significant discounts for cash payments or financial assistance programs that are not available if you charge the bill. Always ask about payment discounts, financial assistance, and charity care programs.

Negotiating Medical Bills Before Charging Them

Before putting a medical bill on your credit card, try negotiating the amount. Studies show that patients who negotiate their medical bills save an average of 20% to 50%. Start by requesting an itemized bill and reviewing it for errors and duplicate charges.

Many hospitals have financial assistance programs for low- and moderate-income patients. Nonprofit hospitals are required by law to have financial assistance policies, and many for-profit hospitals offer similar programs.

If negotiation does not reduce the bill to an affordable amount, consider using a debt validation approach. While designed for collection agencies, the principles of requesting detailed documentation and verification apply to medical billing disputes.

Alternatives to Credit Card Financing

Medical credit cards like CareCredit offer promotional financing specifically for healthcare expenses. These cards typically offer 6 to 24 months of no-interest financing, but if you do not pay the full balance within the promotional period, deferred interest is charged.

Personal loans from banks, credit unions, or online lenders often have lower interest rates than credit cards, especially for borrowers with good credit. A personal loan with a fixed interest rate and repayment term gives you predictability.

Health savings accounts (HSAs) and flexible spending accounts (FSAs) provide tax-advantaged ways to pay for medical expenses. Contributions to these accounts are tax-deductible, and withdrawals for qualified medical expenses are not taxed.

What If Medical Bills Go to Collections

If a medical bill goes unpaid and is sent to collections, you have the same rights as with any other debt. Send a debt validation letter within 30 days to verify the debt, check for errors, and potentially negotiate a lower settlement.

Medical debts under $500 are no longer reported on credit reports as of 2023. This provides significant relief for people with smaller medical collection accounts.

For larger medical debts, work with the collection agency to verify the debt amount and explore settlement options. Medical debts are often sold to collection agencies for pennies on the dollar, which means there may be room for negotiation.