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If you've been hit by a huge out-of-pocket medical bill, you might be tempted to sign up for a medical credit card. Companies such as Wells Fargo, Citigroup, GE capital and J.P. Morgan Chase offer these cards. They provide a credit line specifically to cover medical procedures and treatments for your entire family – including pets. These cards are becoming more and more popular due mostly to rising healthcare costs. However, it's important to understand that one of these cards will not reduce your debt. It would only serve to increase it. One member of a Boston-based consumer advocacy group pointed out that the irony that "these cars are probably best suited to people who already have financial resources."
How these cards work
The way medical credit cards work is similar to other credit cards. You take out a loan to pay for your treatment and then pay the money back over time. These cards can be used for most medical care, dental visits, vision care, cosmetic treatments and surgeries, veterinary care and hearing care. Most people who sign up for one of these cards do so at the office of their healthcare provider. The card may come with 0% interest for as long as you pay each new charge within a certain time, which are usually six to 24 months. Some medical credit cards have extended payment plans for up to 60 months at a fixed interest rate.
The devil is in the fine print
Before you sign up for one of these cards make sure you read the fine print. If you're facing a big medical or dental bill, a card where you pay no interest can seem like a terrific option. But most require that you make a minimum monthly payment and if that payment is late, your interest rate could increase drastically.
To avoid interest charges
If you make your monthly payments on time and pay off each of your charges within the allowed time period, you can avoid having to pay any interest. However, if you carry your balance past the promotional period, you could be subject to high interest rates of 24% to 30% of the original purchase amount and these rates could be retroactive to the date of your purchase.
Be aware of your options
Fortunately, there are options available that could help you pay for that medical or dental procedure and without the danger of ending up with a 30% interest rate. One of the best is the no-interest payment plans offered by many healthcare providers. Most of these providers will even discount your bill if you pay cash. In fact, I have seen medical bills slashed by hundreds of dollars because the patient paid in cash.
If your medical credit card debt spirals out of control
Medical credit card debts can spiral out of control just like any credit card debts. If this happens to you, you would be well advised to look at some alternatives for getting it under control. Many families have found help through consumer credit counseling. Others have been able to use the equity in their homes to obtain debt consolidation loans and used the money to pay off their medical credit card and other debts. A third way to manage those debts is through debt settlement. It's a way to consolidate debts without having to borrow more money. In fact, debt settlement can actually be used to reduce debts.
How debt settlement works
Debt settlement is sometimes called debt negotiation. This is because it requires you to negotiate with your creditors to get your balances reduced. You'll need to make no payments on any of your unsecured debts for probably six months before you contact your creditors and offer to settle with them. Your settlement offers would typically be 40% or 50% less than you owe. Many lenders will settle if you can convince them that it's in their best interests. Of course, you would need to have the cash available to pay your settlements. But if you do have the money, debt settlement can be an excellent way to pay off those medical credit card bills and any other debts within a reasonable amount of time.