Last year, IndexCreditCards.com warned about the risks posed by medical credit cards in " Dangers of medical credit cards enough to make you sick." This followed a consumer alert issued in November 2013 by New York attorney general Eric T. Schneiderman, who advised patients not to be rushed into committing to agreements for these products. Some doctors' and dentists' offices use high-pressure sales techniques to push consumers to sign up on the spot to terms and conditions they don't fully understand. In the words of the alert: "Give yourself time to understand the terms of financing. Take the time to read the entire contract; don't rely on a sales pitch."
Caution not enough
Now, a new report, published on July 22 by Consumer Action, suggests even those who follow that advice may not be adequately protected. Often, it alleges, critical information contained in these credit agreements is hidden or incomplete, meaning even the most diligent patient may end up taking on obligations he or she doesn't fully understand. In 2013, federal regulator the Consumer Financial Protection Bureau took enforcement action against one of the biggest issuers of medical credit cards, forcing it to repay $34 million to consumers. At issue was a concept called "deferred interest."
Some -- but not all -- medical card issuers offer extended deferred-interest periods ranging from six to 24 or 25 months. During this time, you're charged a zero-percent APR. That sounds like the deal you get from balance-transfer credit cards, doesn't it? But there's a big difference. With these deferred-interest medical products, you MUST pay back the full amount due within the stated period, which is highly unlikely to happen if you make only minimum payments. Otherwise, you don't just have to pay interest in future on the remaining balance when the introductory rate ends (as is the case with balance-transfer credit cards): You have to pay all the accumulated (or "deferred") interest you would have paid during the introductory period.
Hard to avoid costly mistakes
No, really. If you're a day late -- or a cent short -- clearing your balance at the end of the introductory period, you have to pay as much as you would have had there never been a special offer.