Be careful with medical credit cards
Susan Tompor/Detroit Free Press
11 August 2011
Diane Lafata figured that financing $5,500 for dentures on a medical credit card was a doable deal.
The card for which she and her boyfriend qualified even had a 0% introductory rate.
But that card's annual rate has since jumped to 22%, and Lafata isn't happy at all with what's left of her teeth.
The top dentures don't fit and sit in a drawer. The Pinckney woman doesn't have the bottoms because they weren't finished correctly.
And the dental outfit -- Allcare Dental -- is out of business. The nationwide chain operated in several states and had 14 branches in Michigan.
Two states -- Ohio and Pennsylvania -- took legal action against New York-based Allcare, accusing it of failing to deliver promised services to consumers after it abruptly closed early this year. Michigan's attorney general is working to help consumers resolve complaints.
"They robbed me," Lafata said.
She does not have a job and is still struggling to pay off more than $2,000 on the card. "I don't want to go in public because I have no teeth."
Should you sign up for a credit card at your dentist's office -- a card that just covers a dental procedure? Or the doctor's office? The plastic surgeon? Or the vet's office for the dog?
Does it ever make sense to get one of these medical-related credit cards?
It might -- if you believe the office will stay open and you can pay that bill off before any promotional 0% rate ends.
But Lafata's story shows why consumers must take extra care as credit-card issuers ramp up marketing of health-specific credit cards.
Health care credit cards' fine print might make you sick, Susan Tompor warns
If you want to buy a mattress or a TV, there's a way to finance it at the store. Now, if your child needs braces or you'd like Botox, it's easy to get credit on the spot, too.
Major issuers have special credit cards or special lines of credit that are designed to cover a medical procedure: including ChaseHealthAdvance, the Citi Health Card, and General Electric's GE Money's CareCredit.
ChaseHealthAdvance offers consumer financing for medical needs and healthcare expenses which may not be covered by insurance.
You're likely to hear about such cards when you're sitting at the dentist's, the doctor's or veterinarian's office. The cards cannot be used for other items, like groceries or clothes.
Should you open a credit card account as you worry about your health or your beloved pet?
"In general, we think it's a bad idea," said Mark Rukavina, director of Access Project, a Boston-based advocacy group that deals with medical debt.
Rukavina said an assistant in a doctor's office may not explain all the fees or rules well. Some consumers are under so much stress that they might not understand the terms.
"The practice of having medical providers promoting these cards should stop," Rukavina said.
One advantage is that you can receive treatment immediately for some costly procedures if you do not have the cash, but qualify for a credit card. Some people can save money with low, introductory rates.
But some consumers have complained that they didn't realize that they signed up for a credit card, or they didn't know when the 0% rate would end.
Then, there is the outside possibility of trouble when an office shuts down unexpectedly. Michigan Attorney General Bill Schuette's office has received about 380 complaints relating to Allcare Dental closing.
The office had 22 Allcare complaints involving ChaseHealthAdvance third-party financing and 18 complaints involving Care Credit/GE Consumer Finance, said Joy Yearout, deputy director of communications for the Attorney General's Office.
Seven Michigan consumers received refunds or had their loans canceled involving ChaseHealth and Allcare; 10 consumers received refunds or had loans canceled involving GE/CareCredit, she said.
Patients prepaid for dental services they did not receive, she said.
The Michigan attorney general is working to resolve complaints and get money back for consumers.
To be sure, you can sometimes get money back. A Chase spokesperson said that ChaseHealthAdvance customers receive a full refund for any procedure that was not performed.
Citi said it processed refunds for Citi Health card customers who contacted the company because of the closure of Allcare Dental.
But some issues could be disputed and some customers with high-rate cards from various issuers are still wondering how they'll get out of a mess.
Sometimes, these credit cards can work fine, but they often work best for people who can afford the procedures anyway, Rukavina said.
A few years ago, I opened one card to get a discount on some glasses, promptly paid it off before the 0% expired and closed the card. No hassle.
Gerri Detweiler, personal finance expert for Credit.com, said consumers should go online to review the terms -- and research complaints.
Talk to your insurance company about copays or find out about any coverage under a public program.
"Don't assume that you're going to have to bear the full burden of the procedure," Rukavina said.
Dorothy Barrick, group manager and financial counselor for GreenPath Debt Solutions in Troy, noted that if money is owed directly to a doctor or hospital -- and not on a medical-related credit card -- the debt is typically interest-free.
"The disadvantage of owing the debt directly to the hospital or doctor is that they often are sold to an outside collection agency," she said.
Owing a collection agency and having it reported to a credit bureau can bring down a credit score.
Signing up for a credit card that can climb to rates of 25% or higher can hurt your pocketbook, too. So pay attention to how long a seemingly ultra-low rate lasts.
The promotional rate might end in six months or one year -- but the terms on these medical cards could be structured like a "deferred interest" loan, for which you could owe rates of 25% or more on the entire purchase if you don't pay off the balance before the promotional period ends, according to Lauren Bowne, staff attorney for Consumers Union.
Borrowing $2,000 on a card that charges an annual rate of 22% is a quick way to dig a deep hole. Pay the minimum payment each month -- starting around $40 -- and you'd take 46 years to pay off $2,000 and pay $12,736 in interest charges, based on the Federal Reserve's calculator.
Yes, that's nearly $13,000 in interest. Talk about needing another round of Botox.