Medical Credit Cards -- Future $150 Billion Industry Preys on Need for Easy Money

In Ulysses’ time, the sirens sang hauntingly beautiful songs to lure sailors to their doom. Today we have fiscal sirens. They don’t sing. They simply flash squares of plastic in front of hapless victims, thereby drowning them in red ink.

What is your heart’s desire? What do you need? What do you want? Over the past few decades lenders have blurred those lines: we grew to crave not just what we needed, but what we wanted, and if our hearts’ desires cost more than our dreary budgets, no matter. A lender would extend a plastic card.

Of course, the past twelve months have silenced a lot of those lenders. No more easy mortgages, even easier home equity loans, fewer ubiquitous credit card offers.

But a new siren has risen, proving that P.T. Barnum was right. We seem to be a nation of suckers, easily gullible marks for the latest legal siren: medical credit cards,.

The cards are not aimed primarily at those expenses that insurers cover, but at discretionary expenses, like teeth whitening, cosmetic surgery, lasik surgery, weight-loss programs.

Ostensibly medical credit cards offer patients an easy way to spread out payments. A tummy tuck costs roughly $10,000; lasik surgery, $2000; teeth-whitening, $500. A patient may not have the $10,000, $2000, even the $500, or may not want to pay the entire tab up front. By putting the charge on a medical credit card, the patient spreads out payments, provided he pays the interest charge, as well as the initial enrollment fee.

At the same time, these cards assure physicians, dentists, counselors – whoever contracts with the credit card companies – that they will be paid. If the patient doesn’t pay, the credit card company will have the responsibility of hassling the deadbeat, sending dunning letters, turning the uncollected bill over to a collection agency.

The companies market the cards primarily to providers. Without these cards, some providers face a much smaller market for their services. The potential demand is high: Many Americans would like perfect vision. Ditto for thin tummies and white teeth. But a lot of these would-be patients can’t readily pay the tab.

The cards take away that worry. Now, thanks to easy credit, providers needn’t restrict their services to patients who can afford the procedures. The providers who contract with a medical credit card company will be paid, regardless of the fiscal straits of the patient.

With not-so-subtle advertising, the demand can truly soar. Do you want to be thin? To have perfect teeth? To throw away your eyeglasses? Just sign on the dotted line. The terms sound generous: no down payment, 60 months of easy payments.

For people who can pay, the credit cards are useful. For people who can’t, the credit cards are a danger, as threatening as any siren of old.

Marketing is aggressive. Economists expect the use of these cards to triple in another five years, to reach $150 billion.

For lenders, the cards are profitable. New enrollees pay a small sign-up fee, then no interest for as long as six months. Afterward, the interest rate mounts. Lenders generally ask for income, not credit history. One card offers a cheery statistic: for a $10,000 bill, you need pay only $300 a month, but doesn’t specify how long you will be paying. It is no surprise that the big consumer lenders, like Citibank and JP Morgan Chase, offer this medical line of credit.

Meddlesome state governments — the kind of meddling that free market enthusiasts deplore — have started to review these cards. The Attorneys General in New York and Minnesota are investigating some of the lenders, hoping to erect the kinds of safeguards that will keep even more Americans from falling deeply into debt — again.