Tip 3. Carefully consider the benefits and costs to putting medical debt on your credit card

Putting medical bills on your credit card may relieve one debt, but can increase your debt overall.

Medical expenses tend to come in large numbers. A few tests and an overnight stay in the hospital can run into the thousands of dollars. One of the most frustrating positions to be in is when you want to pay a debt, but the only way you can afford to do so is by incurring new debt or making minimum payments.  That extra burden may put you at serious risk for falling behind on debts or even for filing bankruptcy.

One thing to consider when using a credit card to pay medical bills is the amount of available credit remaining on your credit card account. A factor of your credit score is how much debt you have compared to your available credit limit. The ideal ratio is 30%. This means that at any given time you should only be using 30 % of your credit line or it will begin to negatively impact your score.

Another consideration is your monthly minimum payments on the credit card. The reason for putting medical bills on a credit account is typically to make the amount of debt more manageable to repay, so make sure that the new payment on your credit card is something you can afford. Also, be sure to make all of your payments on credit cards on time. If you do not, you may be penalized with late fees, an increased interest rate, or both. Review your budget and use an online calculator to estimate what your new payment will be. You can find a credit card calculator at www.americanfinancialsolutions.org under the AFS Education Resources tab.

When you are deciding whether to pay the debt with your credit card, consider what other resources you have to pay your medical bill.  This may include developing a payment plan with your medical provider, requesting financial assistance, or contacting a credit counseling agency for help. When you contact our credit counseling agency, a certified credit counselor will work with you to develop a plan for repaying your debts and successfully managing your finances. The counselor’s role is to help you identify options for repaying your debts that you may not realize are available. Your AFS counselor will help you develop a plan and provide the support you need to successfully get out of debt.

Published Oct 12, 2011.