Blog | June 12, 2023

Zero-Interest Patient Financing vs. Medical Credit Cards: What’s Really the Difference?

close up of patient differentiating between zero-interest patient financing vs. medical credit cards, reviewing many medical bills with calculator

Setting the Scene: Rising Healthcare Costs and Medical Debt

In today’s healthcare landscape, the rising cost of healthcare poses a significant challenge for patients and providers. When healthcare costs soar, people’s ability to receive and pay for medical care dwindles, which in turn impacts hospitals’ bottom line. If patients aren’t receiving or paying for their care because they can’t afford it, providers are missing out on crucial cash flow that helps keep them afloat.

In an effort to address this, patient financing and medical credit cards have seen a major emergence within the industry, being available in a majority of health systems and hospitals. While they claim to provide the same results – offer patients affordable ways to pay for their care, thus increasing provider earned revenue collections – there are massive differences in how well these actually meet patient and provider needs. We’ll explore two financing options” zero-interest patient financing vs. medical credit cards, and shed light on why patient financing emerges as the better choice in helping patients afford the care they need.

Medical Credit Cards and Interest-bearing Financing: Short-Term Solutions That Cause Long-Term Problems

While medical credit cards and some patient financing solutions may seem like viable options, experts say that these can add to the growing healthcare debt crisis. These often have high-interest rates or leverage deferred interest. According to a May 2023 CFPB report highlighting the cons of high-interest medical credit cards and loans, “People use specialty credit cards or loans with deferred interest to pay for almost $23 billion in medical expenses”. Patients paid a whopping $1 billion in deferred interest, also.

Add confusing repayment terms/contracts and the negative impact on credit scores from missed payments, and patients wind up paying much more than their initial out-of-pocket cost. With more medical debt piling up and a lower credit score, providers offering these solutions may be worsening the physical and financial outcomes for their patient population.

Additionally, the amount of federal scrutiny of medical credit cards and interest-bearing patient financing seems unending. Regulatory bodies are increasingly exposing the unethical practices of these vendors, causing major reputational risks for health systems that offer their services. After scathing reports from NPR and KFF detailing these predatory practices, Senators Elizabeth Warren and Edward Markey sent a letter to Wells Fargo and Synchrony Bank, expressing concern that the banks were profiting off the worsening crisis of patients who are unable to afford their medical care. They specifically noted that deferred interest plans are inherently deceptive and requested data from the banks about their programs. More federal and state legislation protecting patients and targeting these practices is surely on the way, and providers need to be ready for these disruptive changes if choosing to partner with a medical credit card company.

Zero-Interest Patient Financing: Meeting Both Patient and Provider Needs

Zero-interest patient financing takes a more compassionate approach to affording healthcare expenses while providing the same, if not more, in collected revenue to providers. By offering patients the ability to pay low monthly balances over time with no added interest, zero-interest patient financing offers a compelling solution to the financial burden associated with healthcare expenses.

It provides several benefits for both providers and patients, including the elimination of interest charges and hidden fees, predictable and manageable repayment terms, and financial flexibility that brings peace of mind. When care is more accessible for patients – i.e., being able to pay down balances over time with flexible repayment terms, low monthly payments, and no interest ever – it results in more patients seeking out and paying for care, and more payment assurance for providers. On top of this, patients won’t have to worry about unnecessary dollars being added to their total balance from interest, which removes even more financial barriers to receiving care. All these aspects create the best possible financial experience for patients while increasing patient retention, satisfaction, and collection of earned revenue for providers.

While patient financing can be more flexible for changing patient financial needs, it’s important to note that not all patient financing solutions are zero-interest. As mentioned before, interest-bearing or deferred interest solutions are seeing more unsatisfied patients and more negative attention from the press and regulatory bodies. With many patient financing solutions offering high-interest rates – whether it be initially, or in the form of deferred interest – it is crucial to understand if patient financing vendors include interest of any kind (or hidden fees) within their solution.

Why Zero-Interest Patient Financing Is the Better Choice

As solutions on the market currently stand, zero-interest patient financing proves to be the ideal solution compared to medical credit cards or other interest-bearing solutions. When surveying 2,500 patients for CarePayment’s Member Survey, we found the following:

  • 0% of patients preferred a traditional interest-bearing financing program.
  • 91% of patients said it was easier to pay for medical expenses when they have at least 12 months to pay.
  • 45% of patients said they did not know how they would pay for their medical expenses without CarePayment’s zero-interest patient financing.
  • 74% of patients surveyed said they would prefer to pay their future medical expenses with CarePayment.

The transparent nature of these programs – no hidden fees, no hidden interest – the protection of patients from high-interest rates, improved affordability for patients, improved collections, and reduced legal risk all point to zero-interest patient financing creating the best financial outcomes for patients and providers alike.