Medical Credit Cards and Loans Carry a Heavy Burden

Faced with a big health care bill, you may want to think twice about putting it on a medical credit card or taking out a medical installment loan. These financing options can carry high interest rates that could put you deeper in debt or, worse, threaten your financial security if you aren’t careful, according to a new report from the Consumer Financial Protection Bureau (CFPB).​

Interest payments can increase medical bills by close to 25 percent for cash-strapped consumers who don’t pay off their balances quickly, according to the consumer watchdog agency. In fact, the CFPB estimates that U.S. residents paid $1 billion in deferred interest on medical credit cards and loans from 2018 to 2020. ​

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“Lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said CFPB Director Rohit Chopra. “These new forms of medical debt can create financial ruin for individuals who get sick.” ​

Over the past few years, financial services firms and fintech companies have created new financing products to cover medical procedures and health care for consumers who can’t afford payments outright. These medical credit cards and installment loans used to be reserved primarily for elective care, but the CFPB found they are now used for everything from ER visits to routine checkups. In many cases, the CFPB says they’re replacing low- and no-cost informal payment plans offered directly via medical providers. ​

“These products are often offered by a trusted doctor or nurse in doctor’s offices or hospitals when their patients are under significant stress,” wrote the CFPB in the report. “When these products are offered by medical providers, patients appear not to fully understand the terms of the products and sometimes end up with credit they are unable to afford.” Many of the financing arrangements offer deferred interest for terms between six and 18 months. If a balance remains after the promotional period ends, the patient is charged all the interest that would have accrued since the original purchase date. 

Key findings

Between 2015 and 2020, consumers incurred interest on 20 percent of their health care purchases when using deferred-interest cards or loans. People with credit scores below 619 incurred interest more frequently, for about 34 percent of their health care purchases.

Patients who should be eligible to receive reduced or free care through a financial assistance program or their insurance plan may instead be signed up for a medical card or loan even though the financial assistance programs would be better for them.