Two weeks ago, I discovered that my senior dog needed extensive veterinary care. At the same time, I learned I required major, costly dental work. My veterinary office suggested Care Credit, and I found out I could use it for both my dog and myself. I decided to apply, but I’ve since learned there are many pitfalls with Care Credit that can be costly. In this article, I’ll explain what Care Credit is and how to avoid its traps.
What is Care Credit?
Care Credit is a type of store credit card that can only be used for medical expenses. It’s offered through Synchrony Bank, which also provides many store credit cards. Common uses for Care Credit include pet care, dental care, cosmetic procedures, and vision care. Care Credit offers promotional financing options, such as 0% interest or reduced APR financing. The specific terms depend on the provider, so while my vet’s office offered six months of 0% financing, another might offer up to 24 months.
The Pitfalls of Care Credit
While Care Credit may seem like a great deal, there are several important pitfalls to consider:
1. Deferred Interest: Care Credit uses deferred interest, not truly zero interest. When you buy something with a 0% interest promotion, interest starts accruing from the day of purchase. If you don't pay off the balance by the end of the promotional period, you'll owe all the accumulated interest from that period. This differs from typical 0% credit card offers where interest isn’t charged retroactively.
2. Impact on Credit Score: When you apply for Care Credit, you need to specify the amount required. If you request $2,000 for dental work, and that's what you're approved for, your card will have a $2,000 limit. Charging the full amount maxes out the card, which can negatively impact your credit score. To avoid this, ask for a higher limit, possibly triple the amount you need, or request a credit line increase if you already have the card.
3. Payment Allocation: Payments on Care Credit accounts with multiple charges are applied to the balance with the highest interest or the earliest due date. This may not align with your payment plan. You can contact customer service to reallocate payments, but it requires diligent monitoring.
4. Payment Timing: Care Credit has a narrow window for making payments that count toward your statement. Payments made just before the statement closes may not be applied as expected, potentially resulting in late fees. Automatic payments are only available on the due date, leaving no buffer for errors. To avoid late fees, use your bank’s bill pay feature and choose the payment date carefully.
5. Vulnerable Sign-Up Situations: Many people sign up for Care Credit when they’re in vulnerable situations, like needing urgent medical or dental care. While it’s easy to qualify for, which is advantageous, it also means many sign up without fully considering the long-term costs.
Alternatives to Care Credit
To avoid the pitfalls of Care Credit, consider alternatives such as 0% interest credit card offers or using an FSA (Flexible Spending Account) or HSA (Health Savings Account). These options can often provide better financial terms, though not everyone qualifies for them or has the time to apply in urgent situations.
Conclusion
Our healthcare system often leaves people with limited options, making Care Credit a necessary choice for many. If you decide to use Care Credit, be aware of its pitfalls and manage your account carefully to avoid unexpected costs. For more information on FSAs and HSAs, watch this video next.
By staying informed and proactive, you can use Care Credit to your advantage without falling into its financial traps.
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