Deferred Interest Credit Cards: A Hidden Medical Debt Trap
In the fight for health and economic justice, deferred interest credit cards are a growing but often overlooked threat. These seemingly beneficial financial tools are frequently used to cover unexpected medical expenses, yet they can quickly become a financial nightmare, trapping individuals in unmanageable debt. This issue is not just about credit; it’s about the well-being of people who are already facing health challenges.
The Problem with Deferred Interest Credit Cards
Deferred interest credit cards are marketed as a way to delay paying interest on large purchases, including medical and dental bills. However, the reality is far more complex and perilous. If the balance is not paid in full by the end of the promotional period, retroactive interest is applied to the balance you owed each month since you made the purchase—often at exorbitant rates. This practice is not only deceptive but also harmful, particularly for those already struggling with medical expenses.
The Facts:
- According to a report by the Consumer Financial Protection Bureau (CFPB), deferred interest credit cards are disproportionately used for health care expenses, with many patients unaware of the potential risks.
- A CFPB study found that nearly 40% of cardholders with subprime credit fail to pay off their balance before the promotional period ends, leading to significant and unexpected interest charges.
- Medical debt remains a leading cause of bankruptcy in the United States. Deferred interest medical credit cards can worsen the impact of medical debt. For instance, a recent analysis of Oregon bankruptcy filings found that CareCredit was the largest holder of medical debt in the state.
The Human Cost: Meet Sarah
I had no idea what my other options were, only that the medical office told me this card was the best option, so I believed it.
Misinformed by her medical office, Sarah believed the deferred interest credit card was her best option, only to find herself trapped in a cycle of debt that prevented her from buying a car. “I had no idea what kind of hole I was getting myself into. If our medical system requires going into this kind of debt, then our medical system is broken. And something needs to change.”
Stories like Sarah’s are far too common, illustrating the predatory nature of these financial products.
Know Your Rights: Protect Yourself
Patients have rights, but they are often not fully informed of their scope. It’s crucial to know that:
- Avoid signing up for a medical credit card if possible. For instance, ask if the hospital or doctor offers financial assistance. Request a discount. Set up a payment plan directly with the provider. If you do sign up for a medical credit card, know that you have the right to clear and transparent information about the terms of any financial product.
- If you believe you’ve been misled or charged improperly by a deferred interest credit card company, you can file a complaint with the CFPB.
Amplifying Policy Solutions: A Call to Action
It’s time for policymakers to step in and protect people from the hidden dangers of deferred interest credit cards. Key policy solutions include:
- Remove Medical Debt from Credit Reports: We are advocating for a rule that prohibits the reporting of medical debt on credit reports. This move would protect patients from the long-term financial damage that medical debt can inflict.
- Ban the Marketing of Deferred Interest Credit Cards in Health Care Settings: Deferred interest credit cards, often marketed directly through medical and dental providers, are a financial time bomb for many patients. We are urging the CFPB to implement a rule that bans the promotion of these products in health care settings, such as hospitals, dental practices, and doctor’s offices.
Polling shows strong public support for these changes, with 61% of voters backing the prohibition of deferred interest credit card marketing in health care settings. This support reflects a growing recognition that these practices are not just unethical but deeply harmful to individuals and families already facing medical challenges.
61% voters support effort to ban the marketing of deferred interest credit cards in health care settings
Source: HIT Strategies
Connecting to Health and Economic Justice
Deferred interest credit cards are not just a financial issue—they are a health and economic justice issue. These products disproportionately affect those who are already vulnerable, turning health crises into financial catastrophes. As advocates for health and economic justice, we must push for policy solutions that prioritize people over profits.
- Racial and Economic Impacts: A CFPB report highlights that Black and Latinx communities are more likely to have subprime credit scores and are disproportionately impacted by deferred interest credit cards. These groups are less likely to pay off the balance before the promotional period ends, leading to significant retroactive interest charges and worsening their financial situations.
- Eligible for Financial Aid but Pushed to Products: The CFPB found that patients who may be eligible for financial assistance through hospitals are often not informed about these programs and are instead steered toward deferred interest credit cards by health care providers, exacerbating their financial burden.
By raising awareness, educating people about their rights, and advocating for policy changes, we can help put an end to this modern-day medical debt trap.
