Do you understand how deferred-interest credit cards work?

Deferred-interest credit cards can be a good financial tool as long as you read the fine print.

The Consumer Financial Protection Bureau (CFPB) recently brought an enforcement action against GE CareCredit to prevent deceptive and unfair credit card enrollment tactics. The enforcement action came after an investigation, where the CFPB found that consumers received incorrect information about how their cards worked, and later some consumers submitted complaints.

If you have been offered a medical credit card, it is likely that the product was a deferred-interest medical credit card. The CFPB says that medical credit cards are frequently offered by dentists, eye doctors, audiologists, cosmetic surgeons and veterinarians. These cards are a bit different from traditional credit cards – such as MasterCard and Visa. Medical credit cards can only be used to pay for health care, and only within the network of healthcare providers that accept the card according to the CFPB. 

A couple things are important to keep in mind if you decide to use a deferred-interest credit card. The credit card company must tell you the date that you must pay off your balance to avoid being charged interest on your purchase. This information must appear on the front page of your bill. Be sure you know this date, because if you do not pay off the entire balance for your deferred-interest purchase, you will be charged interest on the balance that remains on your credit card. The CFPB says that usually, the interest is calculated based on the balance you owed in each month since you first made the purchase. For example, if you do not pay the entire balance off in 12 months, you will be charged interest for each month on the balance you owed in each of the 12 months.

Along with Michigan State University Extension, the CFPB wants to help older consumers be financially healthy and achieve economic security. Please tell the CFPB about your experiences with medical credit cards by commenting on their blog.

The CFPB provides an important warning – If someone suggests that you put your hospital bill on a credit card, be very cautious. Many hospitals have some obligation to provide charity care for those who cannot afford treatment. Once you put your hospital bill on a credit card, you will not be able to gain assistance under a charity care program. If you have limited financial resources, ask to speak to the hospital’s financial counselor about charity assistance. Hospitals typically base the amount of help you’re offered on the federal poverty guidelines.

Actions you can take

If you have a problem with any type of credit card, you can submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372).

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