Consumer Finance: Medical Credit Cards

Medical credit cards are offered by financial institutions to pay for services not covered by health insurance, such as, dental and cosmetic procedures, or for veterinary care.  Medical credit cards received increased attention after the New York attorney General and the Bureau of Consumer Financial Protection brought enforcement actions against Care Credit LLC, an affiliate of GE Capital Retail Bank.  It is alleged that Care Credit failed to provide disclosures and gave inaccurate information to 4.4 million cardholders.

Medical credit cards from large banks offer a revolving line of credit with an established credit limit with some form of promotional financing (special terms and conditions, which are valid for a specified period of time). The most commonly used financing option is deferred interest, with no interest charged for promotional period, but interest charged retroactively if the balance is not paid in full before the end of the promotional period, usually 6 to 24 months.  Among large banks the Government Accountability Office reviewed in May 2014, the most commonly used cards had an annual percentage rate of 26.99 percent or more.  These banks also offered revolving line of credit with fixed monthly payments, with an APR of zero to 17.99 percent.

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Teaching Suggestions

  • Ask students what are other alternatives in financing medical expenses that are not covered by health insurance.
  • Have students survey friends or relatives to determine the use of medical cards.

Discussion Questions

  1. Why would someone get medical credit cards when mainstream credit cards, such as Visa, and MasterCard, offer relatively lower-rate credit cards?
  2. What might be advantages or disadvantages of using medical credit cards?
Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

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