As we’ve discussed on several occasions in the past, medical debt is rough! There’s nothing worse than dealing with an injury, emergency, or even a life milestone (like having a baby), only to be bombarded by the added stress of big bills and intimidating collection tactics. Like with many costs in our culture, our response is frequently a plastic one, and we charge it to our credit cards without thinking twice. What many people don’t know, unfortunately, is that there is an underpublicized reason why you should never do this, and we want to explain.
Medical Bills Are Fairly Lenient
The most important thing you need to understand is that when you have medical debt, you aren’t alone. It’s something that affects millions of consumers, is a key concern of our government and has even caught the attention of the credit bureaus and FICO, so that missed payments have less of a negative impact on your credit score.
But the most important implication here is that medical providers are typically lenient with how they are paid. Of course, this won’t be true for all of them, but it will be for the majority. What do we mean by lenient? Well, you can usually secure some of the following benefits:
- Long-term payment plans (frequently ranging from six to eighteen months)
- Zero or low interest
- Partial payments accepted without penalty
We’ll talk about some of these in more detail, but first let’s explain why using credit cards is a bad idea.
Don’t Use Credit Cards
So why exactly is it a bad idea to put medical bills on your credit card? The reason is that if you can’t pay the balance in full before the month’s end, you will be subject to interest, and this could lead to an expensive repayment (and potentially a long cycle of hardship). This simply isn’t necessary when other options (sometimes including zero interest) are available.
You might be thinking that promotional periods of zero interest and balance transfers might be good options. But remember, balance transfer fees are also expensive and you’ll need good credit to qualify. On top of this, there’s the issue of whether the promotional periods will last long enough to facilitate payoff. If you want to pursue this option, it might be best to do so only after using the available payment plan from your servicer, or to use it in cases where no such payment plan is offered.
The Benefits of Working with Your Servicer
Let’s take a look at the benefits of not paying with a credit card and working directly with a servicer instead.
Getting a long-term payment plan tends to be very easy. Even if you receive a bill asking for the full amount, you can simply call the provider and explain that you would like other payment options. The types of options you are given might vary based on whether you are working with a small, local office or a nationwide provider.
By being able to break up the full amount, you can pay the debt much more comfortably, without having to dip into emergency savings or dealing with high interest rates that credit cards often leave us stuck with.
Zero or Low Interest
Speaking of interest rates, many providers will offer zero interest, while others might charge a low rate, such as two percent.
In some cases, providers will accept partial payments without holding it against you. Basically, by providing a partial payment, you prevent collection activity (and damage to your credit). You shouldn’t rely on this, though, and should reach out immediately to the provider if you are unable to make a full payment so that they can explain any potential repercussions. In some cases, consumers can be retroactively charged for interest if they don’t submit a full payment. While this is unlikely (it’s more common with medical credit cards), you will want to get clarification from the provider before taking any risks here.
We’ve covered the reasons why paying for medical bills with a credit card is a bad idea, and it really comes down to interest and the flexibility of other options. While medical expenses are often outrageously high and come our way when we’re vulnerable, it’s important to remember that they are actually quite lenient if you work directly with the provider.
Take advantage of that leniency when possible so that you can have a comfortable repayment. If you need more help with your budget or want to explore whether your debts might be a good fit for a debt management program, check out our credit counseling service and get started.