Healthcare credit cards appear when you have medical expenses in your future, whether for you or your pet. Here's how to run the numbers …
Pets are expensive. Not as expensive as children, but still expensive. Costs can vary widely, but a cost of five figures over the 12- to 14-year lifetime of a dog is easy to hit.
One of our dogs had a leg injury recently that will set us back a bit. When we asked our vet about payment plans, she gave us a brochure for a healthcare credit card.
On the face of it, the healthcare credit card offers interest-free payment of qualified expenses over time. The card our vet offered allowed repayment over six, 12, or 18 months.
Why the vet offered the card brochure
But what's the catch? You know the drill: If something sounds too good to be true, it probably is.
The vet wasn't just being nice and giving us free float on a nearly-$2,000 surgery. She offered us a credit product that has the following upsides for her:
- She gets paid quickly. There's a processing fee (like with any credit card transaction) but she'll get her money from the card provider promptly.
- It's no cost to her if we don't use it. So no skin off her nose if we decline.
- It reduces the barrier for us saying “yes” to the surgery. Spreading out the payments at no cost is very appealing, and it works well for just about any business that sells expensive items.
- She still gets paid even if we lapse on the payments. The card issuer now has the risk of getting paid back.
Who gets stuck with the downside, though? The card issuer has some downside, as they stand the risk of receiving no interest, but they did get a processing fee up front.
That leaves the person using the card with the rest of the downside — either in the form of (expensive) interest, or a tarnished credit record.
But you'd be unlikely to pick that up, or the other gotchas, just from the brochure. That's what the checklist below is for.
Evaluate healthcare credit cards with this checklist
The marketing brochure had a website listed, so I visited the site. The following is a checklist for evaluating whether or not using a healthcare credit card is worth it.
- Is your vet/ dentist/doctor part of the network? Since our vet offered the brochure, it was clear she was in-network, but if you're looking for a local practitioner who offers interest-free payment plans, then you'll want to know which ones do, and for how long.
- What are the terms and conditions of the card? CareCreditâ„¢, the card that our vet offers, had a link to its terms and conditions. For financial terms and conditions, this one read pretty easily, so I give them … um … credit for that.
- How dated are the terms and conditions? One might expect that a credit provider that promotes “online access & payments” would have their terms and conditions up to date. The ones
- What is the annual percentage rate if you don't follow the rules — as in, if you're late with a payment, miss a payment, or don't pay back the full amount within the promotional period? For the card we were offered, the rate was 26.99%, which in personal finance parlance is “really dang high.”
- How do they calculate the interest charge? In the case of the card offered to us, the method was the daily balance method, calculated from the time of purchase. To see the effect of this, let's say that we incurred a vet bill was $1,800 and were paying this off $100 a month for 18 months. Something happens so that the 17th payment is late. What was a $200 balance before the missed payment more than triples; halfway through month 17 the balance is now about $672. Just like that. Talk about adding insult to injury (or our dog's injury, as the case may be).
- How does the credit provider use your personal information? I was a bit surprised how candid the terms and conditions were in this regard, especially considering how many ways they shared my information. I could expect a lot of “fan mail” from CareCredit's business relations, affiliates and non-affiliates alike.
- Does the card provider force resolution by arbitration in place of the courts? In this case, yes, unless I opted out — in writing, by mail. (Other communication from my end could only be done through the mail as well. From their end, however, email was considered “in writing” and it would have been my responsibility to ensure that I received their emails, rescued things from my spam folder, etc.)
Know your tendencies and reach your own conclusions with healthcare credit cards
After looking carefully at the terms and conditions, I'm not at all keen on signing up for this card. If everything goes well, sure, we could pay over time, interest-free. But there are a lot of ways we could screw up and end up paying a lot of money and end up with a mark on our credit.
Maybe she'll accept a cash discount. Otherwise, we'll use our rewards credit card and the rebate will be enough for a couple of pizzas.
But signing up for this card will risk putting us in the financial doghouse.
