In its new
* Key financing information was often hidden or incomplete, making it difficult for borrowers to adequately compare rates and terms.
* "Deferred interest" was featured on three of seven surveyed cards. Deferred interest is frequently misunderstood by consumers--those who fail to pay in full by the expiration date face lump sum back interest when the promotional period ends.
* Medical credit cards are sold primarily through medical offices, often at the point when payment for a procedure is due and consumers have little chance to explore other options for payment or may feel pressured into opening an account.
Survey details can be found in the Summer 2014 issue (http://www.consumer-action.org/news/articles/medical_ccs_summer_2014) of the organization's newsletter,
Scouring for rates
Consumer Action reviewed seven credit card issuers that lend money specifically to cover health care expenses: AccessOne MedCard, GE Capital CareCredit,
Because the cards are marketed at providers' offices, information provided by the issuers seems geared toward educating prospective business partners rather than consumers. Essential rate information was buried or missing from the websites of three companies' cards (
iCare Financial promises that "Everyone's approved with no credit check" but the company won't answer questions from consumers, insisting that medical providers handle information on rates and terms. When following up with an iCare medical provider we learned that a consultation would be required to get rate information.
"Despite laws that require lenders to give consumers the information they need to compare financing offers, it's often virtually impossible to get the rates and terms for some medical credit cards," said
All of the surveyed issuers promote alluring 0% introductory offers. Three cards (CareCredit,
If consumers understand the terms of deferred-interest offers, they can save a lot of money by avoiding finance charges. "Interest-free offers can provide an opportunity for people with damaged credit records who find it difficult to get loans, but only if they are able to pay off the medical bill in full before the pricey interest payment gets tacked on," says
Last year the
Three surveyed issuers do not charge deferred interest: AccessOne,
Consider the source
Some service providers have an incentive to get their patients to sign up for a medical credit card. That might be the ability to schedule a procedure that the patient otherwise could not afford, or it could be the opportunity to be paid in full immediately rather than have to accept a protracted payment plan from an uninsured patient. In 2010, an investigation by then-
"Patients offered a medical credit card during an office visit are more likely to trust a card being offered by a medical professional--even if the office staff is ill-prepared to explain complex card terms such as deferred interest," said Sherry. She says this was a key point in the
Medical loans--as opposed to medical credit cards--offer consumers more flexibility in how the loan is used but tend to have stricter rules for applicants, such as minimum credit scores (600 to 640). Consumer Action examined five companies: two direct lenders (LightStream AnythingLoan and Med Loan Finance) and three brokers (American HealthCare Lending, MedicalFinancing.com and United Medical Credit) who arrange financing with third-party lenders. We decided to eliminate MedicalFinancing.com from our survey because we could not access customer service representatives during business hours.
American HealthCare Lending and LightStream AnythingLoan (
Med Loan Finance featured hefty finder's fees starting at
Find complete details online:
* Consumer Action's Survey of Medical Credit Cards (http://bit.ly/medicalcreditcards2014)
* Consumer Action's Survey of Medical Loans (http://bit.ly/medical_loans_2014)
Consumer Action staff members
Tips to prevent deferred-interest traps
* Don't use a medical credit card to pay for services in advance. It may prove difficult or even impossible to get a refund for services you don't use.
* Making only minimum payments during the deferred-interest period will not pay off your entire balance by the end of the 0% period. You need to pay more than the minimum--sometimes much more--to accomplish this.
* Know precisely when the no-interest period expires (it may be a few weeks sooner than you expect) and pay in full before that date.
* Don't pay late or miss a minimum payment during the deferred-interest period because you may void the deal and trigger finance charges.
* Consider other payment options before accepting a deferred-interest offer.
* Some medical providers will agree to extended payment plans, without interest.
* For uninsured consumers with little income, hospitals have charitable funds that can assist.
* Zero percent offers on general-purpose credit cards (with low long-term rates) can provide real savings compared to deferred-interest plans.
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