03:31:57 AM Thursday, August 09, 2007

Is It Profitable to Use Credit Card Deals for Heath Care?

Specialty credit cards: the next great rage and step along the path of the evolution of the credit card.

Nowadays, there's a credit card for everything. Credit card deals range from airplane miles to gasoline discounts to credit towards purchasing a car and just about everything else you can think of. If a credit card doesn't exist for it, then it seems that a financing plan does.

The newest plan along those lines is a list of plans for various medical procedures. While all credit card deals offer something to the customer, this one offers one to two customers: the attending physician and the patient.

Credit Card Benefits to the Patient

With the state of medical insurance nowadays, many operations and procedures aren't covered under the insurance. However, with the help of a credit card company, now Doctors can come up with a financing plan for their patient that is tailored to allow the patient to make payments until the operation has been paid for in full.

This is great for the patient, as it allows them to have the procedure done without paying in full up front. Many people do not get recommended (or in some cases even required) surgery for a long time because they simply can not afford it as a consumer. Credit card debt, mortgages and other financial obligations just do not leave them with enough money to pay for an operation up front.

In many cases the Doctor will actually give a discount on the service so that the eventual amount the patient ends up paying in addition to the interest charged by the credit card company is the same as if they'd paid for the operation up front. This not only gives the patient peace of mind that they're finally getting the operation, but lets them rest easy that they aren't being charged a large amount of interest for (in some cases) something that they need to have done.

Credit Card Benefits to the Doctor

Doctors are businessmen and hospitals are businesses. Physicians are around to make money just like everyone else and for this reason they operate under the economic principles of supply and demand. Credit card deals made in order to facilitate more patients getting operations ultimately means more work for them which translates into more overall profits. Under those circumstances, most Doctors are likely to jump at the chance to be a part of this rewards program.

Additionally, the program is free to enroll in. Doctors do not incur any additional charges from the credit card company and they receive their money up front from them, allowing them to finish the procedure and close the account without worrying about having to chase patients for payment. The credit card company takes care of that for the Doctors; it is all part of the deal.

Credit Card Risks Involved

As with any other situation where credit is involved, there are inherent risks to each party. The credit card company's risk is obvious, as it is the same risk they incur on any unsecured loan they give out. They compensate for this risk by charging interest just as they do for all credit card deals and as long as they get paid eventually, tend to not be too fussy about payments. After all, interest is developing for them, something that is in their best interests to happen.

For the consumer, the risks are also similar. Even the best consumer credit card comes with interest rates and other risks and this type of a loan and finance program is no different. In fact all the credit card company is doing is cutting out the middle man represented by the credit card and paying the bill directly for you. The repayment, the interest and the terms are all going to be similar, which means that it follows logically that all the risks would be similar as well.

This brings us to the third (and additional) party in this arrangement; the service provider. There are a number of risks that the service provider might be exposed to and this is largely dependant on the fine print of the agreement. Credit providers sometimes conveniently forget to mention the fine print of the agreement, so both the patient and the Doctor should take the time to view it thoroughly. Just like you would look at the fine print for even the best credit card deals, you should also look at the fine print for this deal.

The first and foremost risk to the service provider is their financial liability should the patient default on the loan. Quite often, if this occurs, then the Doctor ends up losing money as well. Add this to the fact that a patient being pestered by a credit company might attribute it to the Doctor and never visit there again and you have the potential for a surgical cost, a customer loss and an unrecoverable underpayment; a three step recipe for disaster.

The idea of extending credit for the purposes of medical procedures is a great one and one that offers a benefit that even the best credit card deals and rewards program will struggle to match. No matter how good the cash back rate is or how many air miles a person gets per purchase, a consumer credit card does not measure up to the ability to get a much needed operation without having to pay for it up front.

Just remember the TANSTAAFL principle. There isn't such a thing as a free lunch. With great benefits come great responsibility and this program is nothing more than an unsecured loan. Treat it with the same discipline and diligence that you treat your other credit responsibilities and it will likely end up being a very valuable asset. Do otherwise and it could quickly escalate into a nightmare.