CareCredit expansion: High-rate medical card reaches new markets

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Synchrony’s medical card has a 26.99% standard APR and charges deferred interest

Fred O. Williams

Senior Reporter
Expert on consumer credit laws and regulations.

CareCredit is expanding: Is the medical card worth it?

Synchrony Bank’s medical credit card CareCredit is expanding
into more offices, including urgent care, as consumers face more out-of-pocket
medical costs.

But with a standard APR of 26.99 percent, consumer advocates
say people should find another way to pay.

“It’s a pretty bad idea,” said Chi Chi Wu, staff
attorney for the National Consumer Law Center.

It is true that out-of-pocket medical costs are rising, she
said, putting more pressure on finances. “That’s not good for consumers,”
she said, “but putting it on a credit card makes it even worse.”

For people with medical insurance, rising deductibles and
out-of-network fees are increasing the health care financial burden. The Kaiser
Family Foundation found
that 1 out of 4 people covered by an employer’s plan spent than $1,000 on medical
bills in 2015 – and 12 percent paid more than $2,000.

CareCredit: Synchrony’s medical card, at a glance

  • Locations accepted: 200,000
  • Standard APR: 26.99 percent
  • Average U.S. credit card APR: 16.99 percent
  • Settled regulatory complaint in 2013

See related: Instant
credit: Convenience often comes at a price

Card targets new medical
markets

“As rising health care costs shift the financial
responsibility from traditional payers like insurers to consumers, it’s a
natural progression for CareCredit to expand into new medical specialties and
give even more patients access to care,” CareCredit CEO Dave Fasoli said in a statement.

CareCredit is offered by the store-card specialist Synchrony
Bank. Its current base is in dental, optical, veterinary and cosmetic markets,
which usually aren’t covered by insurance. More than 200,000 locations around
the country accept the card, CareCredit said, and 14,000 people apply for the
card daily.

In the past 18 months, it has pushed into new specialties
including urgent care and primary care, physical therapy, ambulatory surgery,
durable medical equipment and gastroenterology.

It also launched a CareCredit Rewards Mastercard that builds
up points for medical purchases. On internet message boards, some users of the
plain vanilla card report being upgraded to the rewards card, which can be used for purchases outside of the medical sphere.

Medical providers
face collection crunch

The company said the moves comes as medical providers face
heightened concerns about patients being able to pay, with the time period to
collect payments increasing.

A study cited by CareCredit projects that out-of-pocket
spending will jump from $416 billion in 2014 to $608 billion by 2019. “[M]any
patients may not be prepared to pay for their medical expenses, whether planned
or unplanned,” CareCredit said.

Alternatives to
high-rate medical financing

Maybe so, but jumping for high-rate financing should be a
last resort. Among the strategies recommended for coping
with medical costs
are: 

  • Ask for a payment plan from the medical provider, which
    may have no interest or a low interest rate.
  • Negotiate the bill and seek help from programs designed
    for ability to pay.
  • Budget for medical expenses and seek informal loans from
    family and friends to close any gaps before using high-rate financing.

Beware of deferred interest promotions

According to CareCredit’s terms and conditions filed with
the Consumer Financial Protection Bureau, the card’s standard APR is 26.99 percent.

By
comparison, the current national credit card average APR is 16.99 percent. The national
average APR for low-interest cards currently stands at 13.87 percent. 

Reduced rates may be available for purchases over $1,000
financed for more than 24 months, according to CareCredit’s website.

The card may also offer deferred interest promotions for
purchases over $200. The deferred interest plan can be a savings for some – and
a costly debt trap for others who fail to pay the full balance by the end of
the promotional period.

Deferred interest promotions are usually billed as “no
interest for six [or 12 or 18] months” if the balance is paid in full by
the end of the period. If not, or if a payment is late, all the interest that built up during the
deferral period is added to the balance. About 20 percent of participants in the programs aren’t able to escape the deferred interest, a CFPB study found. 

CareCredit settled with
CFPB in 2013

In 2013, CareCredit agreed to pay $34 million in refunds to
cardholders who signed up for the card without receiving adequate disclosures
of the terms. The refunds were part of a settlement
with the CFPB
and New York Attorney General’s Office.

According to a 2014 study by the Government Accountability
Office, CareCredit is the leading issuer of medical credit cards, with 4.4
million cardholders in 2013. The report also listed
Citibank, Wells Fargo and Comenity – another store-card specialist – as
issuers of medical cards.




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