The rising costs of medical care in the United States are a constant worry for many Americans. The soaring costs have had the effect of pricing many out of healthcare.

The medical bankruptcy figures are sobering:

· 19.5% of consumer credit reports feature a medical collection

· 22% of consumers with collections only have medical debt

· 54% of consumers with medical debt have no other debts on their credit reports

Even more concerning, medical debt appears to be closely tied with socioeconomic status. According to a paper by the Commonwealth Fund, those who cannot afford insurance are most likely to be driven into medical debt and bankruptcy. While government action has attempted to stem the tide of medical debts, affordability and accessibility of healthcare remain an issue.

Credit cards are the latest entry into the healthcare affordability foray, with two new cards geared towards medical care. Those cards, the SmartHealth PayCard and the CareCredit Rewards Mastercard hope to close the gap in affordability by offering financial coverage for unexpected medical care. How useful are credit cards when it comes to helping Americans finance their medical care? Are they helpful, or do they represent just the latest fracture in an already broken system?

What Are Medical Credit Cards?

Credit cards like the SmartHealth PayCard work by allowing cardholders to finance their emergency medical care. The SmartHealth Card bills itself as the “financial cure for healthcare.” The stated aim of the card is to empower those who would otherwise shun medical care by providing a revolving line of credit to cover a variety of medical costs. These include:

· Deductibles

· Co-pays

· Insurance premiums

· Prescription medications

The card offers minimum credit lines of $3,000 and an indemnity reimbursement plan. This reimbursement plan helps cardholders recover up to $5,000 per year on out-of-pocket expenses such as outpatient emergency room visits, hospital room and board, and ambulatory services.

The CareCredit Rewards Mastercard, for its part, takes a different approach to medical care. The card, issued by Synchrony Bank, is a combination medical card and rewards credit card. The card earns 2X reward points on purchases in the CareCredit Network, as well as for health and wellness purchases, grocery store purchases, and purchases at pet stores.

Beyond the rewards points, the card also offers special financing on CareCredit services, which include dentistry and orthodontics, pet care, and elective procedures.

The Dangers of Medical Credit Cards

The trend towards medical credit cards offers dangers to which consumers should be aware. For starters, medical debt and credit card debt are two distinctly different breeds of animals. As such, both forms of debt affect credit scores differently.

While the allure of bypassing out-of-pocket costs for the simplicity of a credit card payment is easy to understand, credit card debt is much more dangerous than medical debt. Medical debt, for example, does not have a high-interest rate associated with it. Credit cards, on the other hand, do. The CareCredit Rewards Mastercard, for example, has a fixed-APR of 26.99%. Sure, there are deferred interest payment plans for qualified medical care, but these are for limited periods.

Beyond the pilling up of interest payments, credit card debt can be ruinous to a person’s credit score, something not as dangerous when it comes to medical debt. The current FICO credit score model places less emphasis on unpaid medical debt than credit card debt. This means those who finance medical care through cards such as these can expect a bigger credit hit than by financing through traditional methods.

The Benefits of Medical Credit Cards

While there are negatives associated with these cards, it’s vital to look at both sides of the coin. Medical credit cards also offer benefits that are difficult to find elsewhere.

Financing Elective Medical Care

Something these two credit cards have in common is the ability to finance elective medical procedures. CareCredit is commonly used by those seeking hair restoration or dental implants. The SmartHealth PayCard, for its apart, also allows cardholders to finance plastic surgery or other cosmetic procedures.

While financing elective surgery isn’t something new, cards like the CareCredit and SmartHealth make it much more affordable. Typical cosmetic surgery loans can feature interest rates as high as 36%. The fixed-rate with the SmartHealth PayCard, on the other hand, is around 18%. With CareCredit that rises to 26.99% — but the card also features special financing. Cosmetic and elective surgery loans also come with origination fees and prepayment fees, making them more costly in the long run.

Financing Pet Care

Pet owners also benefit from these cards. Pet healthcare costs in the United States is $60 billion-a-year industry. Caring for pets is an expensive undertaking, which can amount to tens-of-thousands of dollars over the lifespan of a cat or dog.

Many Americans struggle with the costs associated with medical care for aging pets. As such, a card like the CareCredit Card is appealing. Pet financing options aren’t as pricey as elective procedures, but they still carry interest payments that are considerably higher than the typical credit card APR. With the special financing options available, these cards make perfect sense for concerned pet parents.

Are Medical Credit Cards the Future of Healthcare Financing?

It is entirely understandable that many Americans, weary of the rising costs of primary healthcare, may turn to credit cards to help offset these costs over time. It is also understandable that banks and companies are willing to put profits over people.

That is not to say that there are no benefits from credit cards like those discussed — those seeking elective surgeries that are otherwise unaffordable benefit most. Elective procedures might not be medically necessary, but for many, they are psychologically important. The state of mental health in modern American society is at the forefront more than ever. Moreover, while dental implants, hair restoration, or breast implants will not solve an underlying self-esteem issue, they are none-the-less measures commonly undertaken.

Cards like this help those who can benefit most from these procedures, offering them an avenue to self-improvement that would otherwise be closed.

Ultimately, however, the rise of medical credit cards needs to be treated with caution and concern. As one of our editors rightly noted in a recent article, “As of right now, the SmartHealth PayCard may benefit healthcare providers more than it does patients.” While there are benefits to cards of this ilk, it does not appear to be regular healthcare costs.