Jiffany Yarina didn’t max out her credit card for a home improvement or luxury purchase. It was cancer.
In 2005, Yarina started to lose a lot of weight and saw her tonsils swell. His doctors eventually diagnosed him with non-Hodgkin’s lymphoma. She needed chemotherapy and a tonsillectomy, but she had no health insurance.
Yarina was in the National Guard but was not yet eligible for Tricare, the military health insurance. Individual insurance was also not a feasible option at the time. So she did what she thought had to do with the growing piles of medical bills: “I literally put everything on my Citibank card,” Yarina said.
The bank said her credit card balance of $10,000 would not earn interest while it was being processed. But all bets were off afterwards, as his minimum payout came in at over $200 a month. She fell behind, even though her father helped her with her other expenses. Her cancer deteriorated her health and left her credit in what she called a “black hole” for years.
Millions of sick and injured people like Yarina, who are uninsured or have large deductibles, have put or will soon put their medical bills on a credit card. A Kaiser Health News and NPR survey estimates that 1 in 6 adults pay off medical or dental credit card debt. A survey by credit card giant Discover suggests the total could be even higher: around 41% of people with medical debt report having used a credit card for that debt – scenarios that stem from consistently high rates of people not insured as well as an increase in debt. disbursements imposed on the insured.
But there’s a new wrinkle for patients who use plastic: Under new federal monetary policy, they’ll likely be saddled with higher interest rates and tighter credit limits. It will jeopardize their solvency, increase their costs and potentially lead to more debt collection lawsuits and wage garnishments for people who can’t keep up, said Erika Rickard, an attorney who studies the civil legal system for the Pews. Charitable Trusts.
The Federal Reserve aimed to temper national inflation in June by raising its benchmark interest rate by 0.75 percentage points, the biggest such hike since 1994. The Fed is expected to repeat the increase this week. This means that it will become more expensive to borrow money for mortgages, loans and credit cards.
Jay Zagorsky, an economics professor at Boston University’s Questrom School of Business, said there’s no perfect correlation between a higher Fed rate and higher interest rates for credit cards. While the Fed rate is a key metric, card companies consider other lending rates and credit ratings. However, Zagorsky said he fully expects in the near term that “credit card interest rates will start to climb again. I expect that more because I think banks are very concerned about risk right now.
Darker economic conditions could also prompt credit card companies to cut people’s credit limits, often without notice. In rare but extreme situations, companies that give proper notice can impose penalties if people exceed these newly lowered limits. For example, if a patient puts $8,000 in medical expenses on a credit card that has a limit of $10,000 and the credit card company decides to lower that limit to $7,500, the patient must find $500 – or get run over with extra charges.
“That’s actually what worries me,” Zagorsky said. Subprime and deep subprime borrowers are especially vulnerable to medical bills that eat up their available credit. Their lines of credit average $4,500 and $3,100, respectively, according to 2020 data from the Consumer Financial Protection Bureau. A simple outpatient procedure for someone with a high deductible could easily eat up that amount.
The average annual credit card interest rate ranges between 17% and 21%, and these rates have been slowly rising since the Fed’s June hike. Interest rates are based on credit reports. People with better credit are more likely to pay off their balances quickly and get lower rates as a result.
Some hospital systems have started offering credit cards to patients. These cards are touted as economical ways to pay off deductibles, copayments and coinsurance, but the fine print shows they can have much higher interest rates than already rising averages.
AdventHealth, a tax-exempt system that owns 50 hospitals in nine states and generates $15 billion in annual revenue, recently partnered with CareCredit on patient credit cards. The system does not charge interest if patients pay their balances within six to 24 months, depending on their plan. But if patients fall behind, interest will be charged “from the original purchase date,” according to CareCredit’s terms. The annual interest rate for new accounts is 27%, starting in July.
AdventHealth and CareCredit did not respond to interview requests.
If Fed policies continue to push interest rates up, people who want to avoid using their credit cards or can’t get one might try other ways to finance their care – like “buy now, pay later”, which has become a growing but controversial option. These point-of-care loans basically allow people to pay a down payment for a service, such as a medical bill for a procedure, and then pay off the rest in a few installments. Sometimes there is no interest or late fees.
“We want to give patients every possible payment option,” said Brian Doyle, vice president of Rectangle Health, a company that works with dental and medical practices to help patients access “care” financing plans. now, pay later”. Doyle explained that patients aren’t penalized if they miss a payment, but recognized interest accrues if they don’t pay their balance at the end of their term.
The “buy now, pay later” movement comes with a mountain of caveats. Notably, “buy now, pay later” does not enjoy the same consumer protections as credit cards; people don’t improve their credit score by paying on time; and many companies still charge interest or late fees. Interest rates for people who default on Rectangle Health installments are based on soft credit and could be as high as 30%, Doyle said.
During Yarina’s cancer treatment, she finally qualified for Medicaid in Pennsylvania, where she was living at the time, though it took months of begging and arguing. Medicaid retroactively covered much of her medical expenses, including her chemotherapy. Collection agents, meanwhile, were harassing her and her family for her unpaid credit balance.
Yarina still has medical debt today, resulting from teeth, jaw and throat issues that fell under her insurance deductible. But his credit slowly improved. She recently bought a new car, a Hyundai Kona – the first time she was able to do so without needing a co-signer.
“For too long I’ve been seen as having three heads when trying to fund something or get a loan,” Yarina said. In this regard, she said, the “financial toxicity of having an illness” was worse than being treated for the illness itself.