Which Should I Pay First: Credit Cards or Medical Bills?

If you’re wondering whether to pay your credit card or medical bills first, you’re one step ahead of folks who just give up altogether. Neither bill is a high priority debt when compared to other bills you might have such as a mortgage, but it still helps to have a bill-paying plan in place. That way, you won’t be tempted to react to the loudest and most annoying debt collector.

Unsecured Debt

Credit card and medical bills are both unsecured debts -- nothing can be taken from you for nonpayment, which can happen if you don’t pay your mortgage or car loan. This makes both low priority debt. It typically takes months for any collection action to occur with credit cards and medical bills, according to Liz Weston of MSN Money. You usually need to go six months of nonpayment on an unsecured debt for it to go to collections.

Credit Report

If you’re concerned about your credit score, the smart play is to pay the credit cards first. Medical bills aren’t reported to the credit bureaus until they go to a collection agency. Missed credit card payments are reported if you skip even one payment. Try, at least, to make the minimum payment to your credit card account.

Credit Utilization

Credit utilization is the other reason credit card debt has a bigger effect on your credit score than medical debt. This calculates how much available credit you use, and the less you use, the better it is for your score. Medical bills are not factored into credit utilization. Because of that, in 2008, Ethan Dornhelm of Fair Isaac Corp. told Lew Sichelman of Market Watch it’s better for your credit report to have outstanding medical bills than to be maxed out on credit cards.

Medical Financing

If you have a good credit history, you could qualify for zero-interest financing for certain medical procedures. If you're approved, you need to make your payments on time, and you typically need to finish paying the loan in 12 months. Otherwise, you lose the zero percent term, and you wind up paying 20 percent or more in interest, according to Milt Freudenheim in a “New York Times” article from 2007. If you don’t think you can pay the loan in a year, finance it for longer. You won’t get the zero term, but you should do better than the default rate.

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