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Don't pull out a credit card to handle your medical debt

One trip to the hospital can result in a stack of unpaid bills, especially since the doctors and the hospital may bill separately for their services. If you've got a credit card or two with enough room, should you clear the debt and pay the credit cards instead?

Experts say that's a really bad idea.

While bankruptcy over medical debt isn't uncommon, it's better to let that medical bill go unpaid than to bury yourself in credit card debt for a number of reasons.

Medical service providers are often slow to report you to credit agencies. You can make payments and sometimes even miss a few for a long time. One missed credit card payment, however, will damage your credit.

If your debt does go to collections, the credit agencies are required to wait 6 months before they add it to your credit report to give you time to work something out. Even when the medical debt does hit your report, new formulas weigh the medical debt differently. It doesn't count for as much as other kinds of bills.

Medical debt has little or no interest rate, while many credit cards charge in excess of 20 percent. You will pay much more to pay off the same amount over time on a credit card. Also, hospitals frequently have financial assistance for those who qualify. You may have to inquire through their financial department, because these programs are not routinely advertised.

Credit card bills, however, can destroy your credit even when you're paying them. One of the big weighted factors that affects your credit is how much of your credit is in use compared to how much of your credit is available. Use too much and your score dips considerably, even if you're making the payments.

Plus, putting that debt on credit can add years to your payments. It may even double how much you end up eventually paying over time, especially if you're just making the minimum payments. That's essentially a waste of money.

Finally, if your health takes another wrong turn or you develop chronic problems, you may end up filing for bankruptcy anyhow eventually. In that case, the struggle to pay those credit cards loaded with medical debt certainly wouldn't be worth it.

Source: The Motley Fool, "Why You Should Never Put Medical Debt on a Credit Card," Elizabeth Aldrich, April 25, 2018

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