It doesn’t take much to upend many Americans’ finances. A car that won’t start, a furnace that dies or a trip to the hospital can leave households struggling to make ends meet.
According to the Federal Reserve, 44 percent of U.S. adults say they would have trouble coming up with $400 to cover an unexpected expense. Even families who have more in the bank can flounder. Surveys by The Pew Charitable Trusts found that 51 percent of families with at least $2,000 in savings reported trouble paying the bills after a financial shock.
Yet it is hardly a shock if an appliance wears out or a car breaks down.
It’s time to rethink what we mean by unexpected expenses. In my latest for the Associated Press, how to predict surprise bills without a crystal ball.
Don’t pay medical bills with a credit card, no matter how hard the office manager tries to get you to pay that way, unless it is a small bill you know you can pay in full when the credit card bill comes in. The reason you shouldn’t pay by credit card is that medical bills receive special treatment for credit file reporting, and the doctor/hospital will probably not charge interest (at least not as much as your credit card company), or may offer a payment plan or discount.
Having had a lot of medical bills, I’ve found it useful to open a separate checking account for them, in order to keep track of spending and insurance reimbursement.
It also makes it very easy to add up your expenses for tax time.
That’s a good way to handle it. It’s a bit of a myth that unpaid medical bills get special treatment, though. Although the latest versions of credit scoring formulas treat medical collections less harshly than other collections, those versions aren’t yet in widespread use. You can learn more here: https://www.usnews.com/news/business/articles/2017-09-04/liz-weston-credit-bureaus-ease-medical-debt-pain-for-a-few