How to Use an FSA Debit Card on Eligible Purchases

A Flexible Spending Account (FSA) debit card provides a streamlined way to pay for eligible healthcare expenses directly at the point of sale. It functions like a regular debit card, simplifying the use of pre-tax dollars allocated to your FSA and eliminating the need for out-of-pocket payments followed by manual reimbursement requests.

Understanding Eligible Expenses

The Internal Revenue Service (IRS) defines what constitutes an eligible medical expense for FSA reimbursement. These expenses are for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any body structure or function. Common examples include fees for doctor visits, prescription medications, dental care, and vision care, such as eyeglasses and contact lenses. Over-the-counter medicines and certain medical supplies also qualify.

Not all health-related purchases are eligible. Ineligible expenses include cosmetic procedures, unless medically necessary. General health items, vitamins, and dietary supplements are not covered unless prescribed for a medical condition. Individuals should consult their specific FSA plan administrator’s list of eligible expenses, as minor variations can exist based on plan design. While IRS Publication 502 guides medical and dental expenses, FSA plan eligibility is governed by Section 125 regulations, which may differ from tax deductions.

Making Purchases with Your Card

Using an FSA debit card at a merchant is a straightforward process, often resembling a standard credit card transaction. When making a purchase, swipe or insert the card at the terminal. You may be prompted to select “credit” rather than “debit,” as most FSA cards process transactions through credit card networks without requiring a Personal Identification Number (PIN). A signature may be required.

FSA cards can be used at various healthcare providers, including doctor’s offices, hospitals, and pharmacies. Many retail stores, especially those selling health products, accept FSA cards if they use an Inventory Information Approval System (IIAS). An IIAS system automatically identifies eligible medical items at checkout, ensuring only qualified expenses are paid with FSA funds. Some pharmacies and drug stores accept FSA cards under a “90% rule,” where at least 90% of their gross receipts are from eligible medical items.

Substantiating Your Transactions

The IRS mandates that all FSA transactions must be substantiated to ensure funds are used for eligible medical expenses. While the FSA debit card provides immediate payment, it does not always eliminate the need for documentation. Retain itemized receipts for purchases made with your FSA card. These receipts should include:

• The provider’s name
• The date of service or sale
• A description of the service or item
• The amount of the expense

In some situations, transactions may be automatically substantiated, reducing the need for manual submission of receipts. This occurs for co-payments at a doctor’s office or recurring prescription purchases at IIAS merchants. For other transactions, your plan administrator may request additional documentation, such as an Explanation of Benefits (EOB) from your insurance provider. Failing to provide substantiation can lead to the transaction being deemed ineligible, card suspension, or requiring repayment to your FSA.

Addressing Common Card Issues

Users may encounter issues when using an FSA debit card, but most have straightforward resolutions. A common problem is a card being declined, which can occur for several reasons. Frequent causes include insufficient funds, purchase of an ineligible item, or the merchant not accepting FSA cards. If a card is declined, paying out-of-pocket and then submitting a reimbursement claim to your FSA administrator is an alternative.

If your FSA card is lost or stolen, report it immediately to your plan administrator to prevent unauthorized use and request a replacement. Report any fraudulent charges promptly to your administrator for investigation. Understand your remaining funds, especially near the end of your plan year. While the “use-it-or-lose-it” rule applies, some plans offer a grace period (up to two and a half months after the plan year ends) or a carryover option, allowing a portion of unused funds (e.g., up to $660 for 2025) to roll into the next plan year. Your plan administrator can provide specific details regarding these options and your account balance.