Should I Pay Medical Bills with a Credit Card?
There’s nothing more important than your health and making the right healthcare decisions to stay healthy. But it’s also important to make the right decisions on how to pay for healthcare expenses, particularly when it comes to medical bills.
Paying for medical bills with a credit card may seem like a logical choice but, depending on your circumstances, it may not be your best option. There are several factors to consider before paying a medical bill with your credit card, including but not limited to:
Is it an emergency?
If you rush yourself or someone you love to the ER or an urgent care facility, and the only way you can pay for necessary medical services is with a credit card, then you don’t have much of a choice in the matter. In this scenario, you have to do what you need to do to make yourself or your loved one well and then deal with any repercussions of paying with your credit card (see below) later.
Do you have health insurance?
With health insurance, once you’ve received a medical bill, you’re going to want to see how much of the bill your insurance company foots before paying that bill with your credit card. If the bill already reflects any insurance payments, go over the bill carefully, as well as your health insurance policy, to make sure everything that should’ve been covered was paid by your insurance company. If you have any questions, speak to your insurance company or your medical provider for clarification.
Do you have the funds to pay your credit card balance in full?
Should you decide to pay a medical bill with your credit card, knowing you can afford to pay off your credit card balance when it comes due substantially minimizes any downsides of paying with a credit card. You’re essentially using your credit card as a substitute for cash or a check, which, for the reasons listed below, could be advantageous.
ADVANTAGES OF PAYING MEDICAL BILLS WITH A CREDIT CARD
There’s no denying that paying a doctor bill or medical expense with a credit card is quick and easy. It can be done right then and there at a medical facility or, depending on who the bill is from, you may be able to pay the bill online, without having to write or mail a check.
If you don’t have the funds for the bill, paying with a credit card may also provide you with instant funding to cover it. However, it’s advisable to only pay a medical bill with a credit card if you’ll have the money by the time the credit card payment is due, for reasons we’ll cover under the disadvantages section.
It May Help You Keep Track of Medical Expenses
If you need to keep track of out-of-pocket medical expenses, for tax or other reasons, using a credit card is a good way to do so. Every charge you make with a credit card should appear on your statement, so tracking medical payments should really be just a matter of reviewing your credit card statements for the year, if you paid them all by credit card.
It Could Earn You Rewards
Using a rewards credit card to pay medical expenses may earn you cash back, airline miles, points, or more, depending on your rewards card. Given the steep price of healthcare, paying for medical costs with the right rewards card could earn you a healthy share of rewards with only a few transactions.
DISADVANTAGES OF PAYING MEDICAL BILLS WITH A CREDIT CARD
1. It Could Lessen Your Ability to Negotiate
Say you don’t have insurance and you put an expensive emergency room visit on your credit card. Well, for all intents and purposes, that hospital bill has been paid, and now your debt is with the credit card company, not the hospital.
Hospitals and medical providers may be willing to negotiate on medical bills and typically offer more flexibility on debt than credit card companies. By working directly with a medical provider, you may be able to save on the cost of the bill and arrange more favorable payment terms. But once medical providers have been paid by the credit card company, they have no real incentive to work with you.
It’s also worth mentioning that paying a medical bill with a credit card could mean you’re forfeiting any financial aid or discounts some medical providers offer their patients.
2. You May Be Charged More Interest
Paying for a medical bill with a credit card—if you know you won’t be able to pay off the entire credit card balance or your credit card has no grace period—means you will pay interest, based on your credit card’s APR, on that bill. If you can’t pay the bill in full, it may be better to work something out with the medical provider, as it’s not uncommon for providers to offer low- or no-interest payment plans to their patients.
3. You Could Be Paying for Services Covered by Your Insurance Company
When you whip out your credit card and pay for medical services at or before the time of treatment, you are making the assumption that the medical provider made all of the correct insurance adjustments on your bill. Or, if they haven’t made any insurance adjustments yet, you may be paying out of pocket for costs that your insurance company actually covers.
Either way, having the opportunity to review your bill and go over whether you received all of the compensation from your insurance company you’re entitled to before putting the balance on your credit card could save you time and money. Especially given it’s estimated that up to 80% of medical bills contain errors. Once you’ve already paid the bill with your credit card, it becomes a matter of working with your insurance company to get reimbursed for costs they’re responsible for. And that, unfortunately, could take weeks or even months.
4. Associated Negative Payment Information May Show up in Your Credit Reports
Most credit card companies report your payment behavior to the three major credit bureaus. So, should you pay for medical expenses with your credit card and then fall behind in making at least the minimum payment due each month, it could harm your credit. Credit card companies typically report you as past due once a payment is 30 days late.
Medical providers typically do not report your payment information to credit bureaus. So, if you’re working with a medical provider on paying off a debt and miss a payment or two, that should not show up in your credit reports. However, if the provider sends your account to a collection agency for being past due, that will likely show up in your credit reports. But that shouldn’t happen so long as you’re making consistent, on-time payments for the agreed-upon amount to the medical provider.
5. You May Eat Up Much or All of Your Available Credit
Paying a substantial medical bill with your credit card could push your credit card’s outstanding balance near or to the card’s credit limit, making it difficult to purchase other items with your credit card.
What’s more, a large medical payment made with your credit card could drive up your credit utilization ratio, an important mathematical equation used in determining your credit score. A higher credit utilization ratio could actually lower your credit score. Many experts recommend keeping this ratio below 30%.
Medical payments are, or will almost certainly be, a part of most everyone’s life—particularly as we grow older. The next time you have a medical bill to pay, consider all of the above pros and cons, and your financial situation, before automatically putting it on your credit card.