As credit card balances hit a record high, medical bills can become 'shadow debt,' expert says - CNBC

Total household debt rose $334 billion in the third quarter, to $19.1 trillion, according to new data from the Federal Reserve Bank of New York. That total doesn't include medical debt — at least, not directly.

An estimated $220 billion in medical debt exists, according to an analysis of 2021 federal survey data by KFF, a national nonprofit healthcare research group. But medical expenses can become hard-to-track "shadow" debt if consumers pay them with a credit card or other forms of borrowing, said Jim Triggs, the CEO of Money Management International, a nonprofit credit counseling organization.

"Technically, as soon as that consumer pays that debt off with another mechanism, now it becomes credit card debt, or housing debt, or whatever mechanism you used to pay it off," Triggs said.

He said 20% of MMI's debt and budget counseling clients in 2025 cited a medical hardship as the reason they went into debt.

Separately, about 17% of households surveyed in 2024 reported still owing money on a loan or credit card used to pay a medical bill, according to a 2025 study by researchers at the Consumer Financial Protection Bureau.

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Americans' credit card debt rose to a record $1.29 trillion in the third quarter, the New York Fed found, while home equity lines of credit saw their biggest quarterly jump since 2005, to $481 billion. Those increases come amid broader affordability pressures for consumers, including pricier everyday expenses amid persistent inflation.

It is "kind of hard to parse" how much of Americans' debt load comes from medical expenses, said Julie Margetta Morgan, president of The Century Foundation, a New York-based progressive nonprofit think tank.

"There's a big piece of medical debt that is about people being on high-deductible health plans, so they have insurance, but they're still getting these big medical bills that they can't pay," Margetta Morgan said. 

Nationwide, among households with medical debt, the median amount in collections is $1,492, according to the Urban Institute. The nonprofit research organization's report drew the data from more than 10 million anonymized credit bureau records from August 2026.

Jessica Colon has used credit cards to pay medical debt. She and her husband were both self-employed at the time with a high-deductible health insurance plan. Colon, now 50, says the debt started with an unexpected $16,000 hospital bill for her son's care in the mid-2010s.

"Because I could barely keep up with that payment, I kept charging on my credit card all my monthly payments, and that's where it all compounded," Colon said. "I was just drowning."

The credit card debt grew to more than $45,000 before she turned to a nonprofit credit counselor, who negotiated lower rates and put together a five-year plan to pay it off. "It's embarrassing, honestly, how much money was interest, and then of course you're building the interest on the interest," Colon said. She zeroed out that debt in early 2024.

Before taking on debt, experts advise reviewing medical bills and billing codes for errors, including duplicate charges. 

Consumers should also ask medical providers if they offer assistance before signing up for a medical credit card, experts say. Many nonprofit hospitals are required by law to have a written financial assistance plan. 

"A lot of nonprofit hospitals are not actually offering this plan to people, and in many cases, they're offering them a medical credit card before they offer that financial assistance," said Margetta Morgan, a former associate director of research, monitoring and regulations at the Consumer Financial Protection Bureau.

Colon said she wishes she had tried to negotiate the medical bills before putting the balance on a high-interest credit card. "You don't want to confront the place that's helping your child. So I didn't realize that I could do that," she said. 

— CNBC's Sharon Epperson contributed reporting.

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