Medical debt can be expensive, and credit cards can be a way for someone to avoid going into bankruptcy over the costs. But a new report from the Biden administration indicates that these credit cards can come at a high cost.
The Consumer Finance Protection Bureau’s report says that credit cards for medical use tend to be more expensive than other forms of repayment, including traditional credit cards. The report indicates that interest rates for these types of credit cards can often exceed 25%.
"Our research suggests that many patients — specifically those who are unable to pay off a deferred interest product during the promotional period — can pay significantly more than they would otherwise pay," the report says.
The report also indicated that medical installment loans can also be quite costly, with an average interest rate of 16%.
The report noted about medical loans and credit cards, “These products often have deferred interest plans, with all accrued interest potentially becoming due at the end of a defined period, which can prove especially expensive and unaffordable for patients.”
Between 2018 and 2020, Americans spent $1 billion in deferred interest.
“Fintechs and other lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said Consumer Finance Protection Bureau Director Rohit Chopra. “These new forms of medical debt can create financial ruin for individuals who get sick.”
SEE MORE: Is your city helping you pay off your medical debt?
The report added that these programs “create a significant financial burden for patients, and deter them from seeking needed health care in the future.”
The Consumer Finance Protection Bureauoffers tips on its website for addressing medical debt. Some of the tips include negotiating a lower payment, asking the provider if they’ll accept an interest-free payment plan and looking for assistance programs.
Some states offer consumer assistance programs to help with medical costs.
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