How to Use Your HSA Card for Medical Expenses

How to Effectively Use Your Health Savings Account Card

A Health Savings Account (HSA) card functions much like a debit card, providing direct access to funds within your HSA to cover qualified medical, dental, and vision costs. This simplifies paying for healthcare services and products, ensuring your tax-advantaged savings are readily available. Understanding its proper use helps maximize benefits for your health and financial well-being.

Understanding Eligible Expenses

Understanding eligible medical expenses is key to using your HSA card correctly. The Internal Revenue Service (IRS) defines these as costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part or function of the body.

Common eligible expenses include fees for doctor’s visits, hospital stays, and diagnostic tests. Dental care, such as fillings, cleanings, and braces, along with vision care, including eye exams, eyeglasses, and contact lenses, are also qualified. Prescription medications and many over-the-counter (OTC) drugs and medical supplies, like bandages and first-aid kits, are eligible. The CARES Act of 2020 expanded eligibility to include OTC medications and menstrual care products without requiring a prescription.

To verify if an expense qualifies, consult IRS Publication 502, “Medical and Dental Expenses.” Many HSA administrators also offer online tools or customer service. Expenses must be primarily for medical care, excluding items or services merely beneficial to general health, such as cosmetic procedures not addressing a deformity or gym memberships not prescribed for a specific condition.

Using Your HSA Card for Direct Payments

The HSA card is designed for direct payment at the point of sale, much like a standard debit card. When making an in-person purchase, swipe, insert, or tap your HSA card at the payment terminal, typically selecting “credit” if prompted. Funds are then automatically deducted from your HSA balance.

This direct payment option is widely accepted at various healthcare providers and retailers. You can use your HSA card at pharmacies for prescriptions and eligible over-the-counter items, at doctor’s offices for co-pays and deductibles, and at hospitals for services received. For online purchases, enter your HSA card details as you would with any other credit or debit card. Some HSA providers also offer online bill pay services, allowing you to directly pay healthcare providers from your HSA account.

Some HSA cards are programmed to only function at merchants that primarily sell HSA-eligible items, simplifying compliance. Even with direct card usage, retain all itemized receipts. This documentation is useful for personal record-keeping and necessary in the event of an IRS inquiry.

Managing Payments Without Your Card

If direct payment with your HSA card is not feasible, or you choose to use personal funds, you can reimburse yourself for qualified out-of-pocket expenses. This process involves paying the medical bill with a personal credit card, debit card, or cash, then later withdrawing funds from your HSA to repay yourself.

To request reimbursement, log into your HSA administrator’s online portal or mobile app. Provide details of the expense, including the amount, date, and a description of the service or product. While your HSA provider may not require immediate submission of receipts, keep them for your records. A key advantage is there is no time limit to request reimbursement, provided the expense was incurred after your HSA was established. This allows funds to potentially grow tax-free before withdrawal.

If your HSA card is declined at the point of sale, common causes include insufficient funds, an unactivated card, or the merchant not accepting HSA cards for the specific purchase. In such situations, paying with personal funds and then seeking reimbursement from your HSA is the appropriate alternative. Contacting your HSA administrator or checking your account balance can help resolve decline issues.

Keeping Records for Compliance

Maintaining meticulous records of all HSA transactions is a fundamental responsibility for account holders, primarily for tax compliance. While HSA administrators do not typically require receipt submission for every card swipe, the IRS holds you accountable for proving all distributions from your HSA were used for qualified medical expenses. This documentation is especially important in the event of an IRS audit.

For each expense paid with HSA funds or for which you seek reimbursement, retain itemized receipts, Explanation of Benefits (EOBs) from your insurance provider, and invoices. These records should clearly show the date of service, the nature of the expense, the amount paid, and for whom the expense was incurred. The IRS requires distributions to be exclusively for qualified medical expenses, not previously reimbursed from another source, and not taken as an itemized deduction on your tax return.

It is advisable to keep these records for at least seven years, aligning with the period a tax return remains open to audit by the IRS. Failure to provide adequate documentation for non-qualified withdrawals can result in the distributed amount being subject to income tax, along with an additional 20% penalty if you are under age 65.