When should you use medical credit cards?

If you understand how they work, medical credit cards can be an easy, convenient way to get medical care. They can even provide you a window of time to pay off medical bills without paying interest charges.

If you get a medical credit card without fully understanding the terms of your agreement, however, using a medical credit card can be a big mistake. If you don’t pay off the entire balance before the end of the promotional period, you could get hit with significant interest charges you didn’t expect.

Here’s what you should know about medical credit cards, and how to choose a card if you decide it’s right for you.

How medical credit cards work

Medical credit cards are health care financing in the form of a credit card. Patients often use medical credit cards to pay for deductibles and other out-of-pocket costs, or for treatments and procedures not covered by insurance. You can even get financing for your pets’ veterinary care with some medical credit cards.

You can use your medical credit cards again and again for future health care needs, just like a regular credit card.

Medical credit card companies make money by charging fees to health care providers, as well as from interest charges to patients. The fees they charge your doctor or other providers can be substantial, and your provider may share in the risk if you don’t pay the balance.

Medical credit cards generally offer deferred interest plans. Under these plans, you don’t pay interest charges on qualifying purchases for a certain period of time. However, the account is not interest-free – it’s only interest deferred. That means if you don’t pay off the balance by the deadline, you can owe interest starting from your original purchase date.

See related: Should I get a new credit card for medical emergencies?

When using a medical credit card is a good idea

Medical credit cards may be right for you in the following situations:

You can’t otherwise afford care

A medical credit card may make it possible for you to get necessary or cosmetic procedures.

“If you are suffering from a medical condition where the condition itself is one of the main barriers that stop you from affording treatment, medical credit cards are the way to go,” says James Taylor, chief operating officer of LetMeBank. “This is especially true if you are likely to earn more once you have had the procedure, as this makes it far more likely that you can pay off any debt.”

You can pay off the balance before the deferred interest applies

If you have cash reserves or room in your budget to pay the entire amount you owe, a medical credit card can give you access to care and a way to pay for it over a period of time without expensive interest charges.

You don’t want another all-purpose credit card

A limited-use card can be a good choice if you don’t want to be tempted to use it for nonmedical spending.

You have good credit

Not everyone qualifies for a CareCredit or Wells Fargo Health Advantage card.

“Medical credit cards are seen as ‘luxury credit,’ meaning that you need to have a very good credit score to qualify, and penalties for missing payments are very high,” says Taylor.

When using a medical credit card may not be a good idea

Medical credit cards should be used with caution. Oleg Yavorovskiy, CEO of Guardian Debt Relief, estimates 25%-30% of his clients have medical debt. Much of that debt is to providers, but lately, more of those clients have been coming in with medical credit card debt.

“Most of the time it’s an emergency solution; they don’t understand how it works,” Yavorovskiy says. “We’ve seen people get into trouble when they can’t pay back the balance.”

You might want to consider an alternative to using a medical credit card in these situations.

You don’t understand deferred interest or might not pay off the balance in time

The biggest problem with medical credit cards may be that people assume they aren’t paying interest for a certain period of time. When they don’t pay off the entire balance by the end of that time, they get hit with high interest rates, not just from that point forward, but starting from the beginning of the account. In addition, if you miss a payment during the introductory period, you could incur additional fees and start incurring higher interest charges from that point forward.

You may miss out on financial assistance or other help

Many medical providers offer cash discounts, financial hardship programs and other help to patients who need it. You may qualify for help, even with a steady income. Be sure you get any help for which you qualify before you put a charge on a medical credit card.

You can’t use the card for the services you want

Not all providers accept medical credit cards, and not all services are covered. Be sure to verify that you can use the card before your visit.

You could be charged more upfront for services

“Most medical credit cards make you pay for the most complex form of a treatment upfront, and there are instances where you do not get all of the treatment that you pay for,” says Taylor. “Take a dental implant, for example. These vary hugely in complexity, and you never know how complex a treatment is until it has already started.”

The health care provider will want to make sure they’re covered, so they generally charge you at the high end of the spectrum, possibly refunding you later if your procedure turns out to be less complex.

You want points or rewards

If you put medical bills on a regular credit card, you may get airline miles, cash back, or other perks.

You want to improve your credit score

Medical credit cards may not help you build a credit score the same way making payments on a regular credit card does.

“Most of these don’t report to the credit bureaus; they would only report negative consequences,” says Yavorovskiy. “They’re not really reporting you as a good account.”

More debt causes you more stress

If you take on more debt than you can comfortably pay off, the resulting stress can compromise your recovery from the medical procedure, according to Taylor.

“This is particularly true if the medical treatment has a long recovery period, or if the condition has a tendency to relapse.”

You can borrow money elsewhere for less

Medical credit card interest rates tend to be high. If you can borrow from your bank or credit union, either as a personal loan or a home equity line of credit, you’ll generally pay far less interest. If you need medical care, a friend or family member may lend you money at a low rate of interest. Or you might qualify for a 0% interest credit card offer instead of a medical credit card.

If you pay off some, but not all, of your balance on a 0% offer, you’ll only have to pay interest on the remaining balance, and only from the time the introductory period ends.

Your provider offers lower-cost options

Some providers allow you to make payments directly to them, often at no or low interest. Others may work with companies that offer a lower interest rate to you or save your provider money, which allows your provider to charge you less.

Dr. Adam Brisman, D.M.D., of Brisman Implant and Oral Surgery, has patients who need financing for expensive cosmetic procedures like dental implants.

“We were referring these patients to CareCredit. CareCredit charges a lot of fees to the doctors, who share some risk if the patient defaults,” says Brisman.

His office now works with specialized loan companies instead.

“We can offer financing through our office, but assume zero risk and there are zero fees to our practice,” Brisman said. “We’re able to pass this saving on to the patient. This allows us to be more competitive with pricing.”

You could put off the procedures and pay upfront

“Some of the procedures being covered, such as LASIK or medical procedures, some are necessary and some are luxuries,” says Yavorovskiy. “The consumer needs to think long and hard if they really need this procedure. If it’s a luxury and they can’t afford it, they can maybe wait and pay for it upfront.”

Don’t put off procedures that are important for your health and safety, of course.

See related: Pay medical bill before debt goes into collections

Types of medical credit cards

Choosing the right medical credit card for your needs is important. Here are the most common cards:

CareCredit

This may be the card people think of first for medical credit cards. CareCredit’s application forms may be on the counter at your doctor or dentist office, and you can even apply while you’re there. CareCredit covers cosmetic surgery, dentistry and primary and urgent care at more than 200,000 U.S. locations.

For shorter-term financing, you pay no interest as long as you make your minimum payments and pay the full amount before the end of the promotional period. For longer-term financing, CareCredit charges interest rates from 14.90% to 17.90%, depending on the amount you charge on the card and the length of your financing.

Wells Fargo Health Advantage

With an APR of 12.99%, the Wells Fargo card charges a lower interest rate than CareCredit. However, it doesn’t cover as many procedures. According to the Wells Fargo website, this card is accepted at dental, vision and veterinary offices nationwide.

See related: I have medical bills in collection. Can I get a secured credit card?

What’s best for you?

The first thing to ask yourself about medical credit cards is whether you really need one. If you want or need medical care, and you can’t afford to pay for it right away, you may be able to make payments to your health care provider, save up and pay cash for the procedure, or get financing some other way.

If you decide you need a medical credit card, be sure to stay on track to pay off the entire balance before the end of the promotional period. Consider setting up automatic payments, so you don’t have to worry about them. You may want to prepare a backup plan, such as savings account or a credit card balance transfer, in case you can’t pay off the last of the balance before the end date.

Don’t feel pressured to apply for a medical credit card before you’ve explored other options and made sure you’ve chosen the one that’s right for you. Medical credit cards can be good financial tools – but only when you understand how to make them work best for you.

Correction: An earlier version of this article stated that AccessOne offers a medical credit card, when it instead works with hospitals and health systems to offer low or no-interest payment plans to patients.