We’ve all heard it a million times: avoid charging medical bills to your credit cards. It’s a sure fire way to find yourself in credit trouble in no time. But, when illness strikes, your only priority is ensuring proper medical care is available and sometimes, that means pulling out the Visa or MasterCard.
With a bit of pre-planning, though, especially if you’re on of the millions of Americans who have no health coverage, you can weather those tough times. Here are a few tips that will help you avoid paying interest on that prescription for an antibiotic and then a few ideas if you find yourself with no other option but to use the plastic in your wallet.
Did you know that even if your annual income is not less than 200% of the poverty level required to qualify for a complete elimination of your medical bills, you still might qualify for a significant reduction in the balances? An overnight stay at the hospital can cost thousands, depending on the diagnosis and treatment, and a reduction could make a huge difference in your family’s quality of life. The key is understanding your debt to income ratio, or DTI. This is the same formula (though with different percentages) used to determine whether you qualify for a mortgage or credit card approval.
From a general standpoint, your medical bill will need to total at least 30% of your annual combined income. Check with the hospital or doctor’s office for more information on this option. Keep in mind, too, that different states have different compliance laws, so it’s important to keep in mind any percentages quoted here might vary depending on where you live.
While more doctor’s offices and some hospitals are becoming increasingly reluctant to set up payment plans, this is still an option more times than it’s not. If you’re able to negotiate a payment plan, it’s your best bet since the majority of these plans have no interest attached to them, unlike your credit cards were you to use them. Also, keep your promises realistic. If you know you won’t be able to pay back a $5,000 trip to the emergency room in 90 days, be upfront about that. Tell the representative that it’s not feasible, but that you should be able to have the balance paid in total within six months. It’s better to get it all worked out now instead of scrambling to renegotiate the terms a few months down the road.
Credit Cards as an Only Option
No matter how hard you try to avoid this scenario, there might come a time when paying with your plastic is your only option. If you have more than one credit card, be sure to choose the one with the lowest APR. Also, focus on getting that balance paid off as soon as possible. Remember, too, that stress and worry can hinder the recovery process, so ensuring a solid repayment plan is in place can give you a healing peace of mind.
Opt for 0% Intro Rate
While it might not be standing practice to encourage a new credit card in this particular situation, a card that offers an intro 0% APR might be a fine solution, too. If you’ve already charged medical expenses, and if you are considering a new credit card, be sure there’s a balance transfer option so that you can take advantage of no interest for a period of time as you work to pay down your balances. Also, try to choose rewards cards that have cash back offers. This allows for the most versatility during the life of your credit card account, which can come in handy especially if you’re buying prescriptions.
Remember, though, your first best bet is to speak with the hospital, especially if you have no coverage at all. Even if you do find yourself having to charge that emergency room visit, efforts to reduce the balance first can only work to your advantage.
Finally, before opening any new accounts, be sure to carefully review the terms and conditions. You’re not trying to create new problems, but if you’re not diligent in your research efforts, you might find yourself with even bigger problems. A credit card should be your absolute last alternative after you’ve explored all others. Otherwise, you might find yourself paying on that same medical bill ten years after that emergency surgery.