Suze Orman: Essential Insights on Medical Credit Cards
Some healthcare providers offer medical credit cards to help patients manage the cost of their care. While these cards can provide temporary financial relief, they can also lead to significant debt. Personal finance expert Suze Orman recently discussed a Consumer Financial Protection Bureau (CFPB) report, explaining how these cards work and advising consumers to be cautious.
The CFPB highlighted that some medical credit cards are restricted to elective procedures or specific services like dental, vision, hearing, or veterinary care. Additionally, you might need to use a particular provider, who may perform a credit check before approving you for credit.
Orman pointed out that medical credit cards often come with an interest-free promotional period of six to 18 months. However, once this period ends, deferred interest can kick in, potentially resulting in a high interest rate of around 25% on the entire original balance, not just the remaining amount.
Orman warned that medical credit cards can be a costly mistake if not used carefully. She offered several tips to avoid or mitigate the risks associated with these cards:
1. **Build Up Your Emergency Savings**: Given the increasing costs being shifted to consumers in our healthcare system, it’s crucial to have savings ready to cover medical expenses when they arise.
2. **Avoid Using a Medical Credit Card for Elective or Costly Care, Especially at the Dentist**: Instead, consider dental savings plans.
3. **Ask for a Payment Plan**: Direct payments to your provider or financial assistance from a hospital or other facility can be safer and might reduce your costs.
4. **Don’t Use a Medical Credit Card Unless You’re Sure You Can Pay it Off Before the Interest Kicks In**: Opt for a card with a long interest-free promotional period if you must use one.
5. **Use Your Regular Credit Card**: If you have a regular credit card or can qualify for a new one, you might get a better interest rate compared to a medical credit card.
The CFPB also recommends exploring all available financial assistance options and emphasizes the importance of knowing your rights regarding medical bills and collections.