What Is an FSA and HSA Card and How Do They Work?

Flexible Spending Account (FSA) and Health Savings Account (HSA) cards are specialized debit cards for qualified medical expenses. They offer a convenient way to access dedicated funds, helping individuals manage healthcare costs. These cards streamline financial aspects of medical care by providing a direct payment method for health-related services and products.

Understanding FSA Cards

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside pre-tax money for eligible healthcare expenses. The FSA card functions as a debit card directly linked to this account, enabling immediate payment for qualified medical, dental, and vision costs. Funds are typically available for use at the beginning of the plan year, even before the money has been fully deducted from an employee’s paycheck.

FSAs follow a “use-it-or-lose-it” rule, requiring participants to spend their allocated funds by the end of the plan year or forfeit any remaining balance. Employers can offer exceptions, such as a grace period of up to two and a half months into the new plan year to use leftover funds, or allow a limited amount to be carried over to the next year. For example, for the 2025 plan year, employers may permit a carryover of up to $660. The maximum employee contribution for health FSAs in 2025 is $3,300. These funds generally stay with the employer’s plan, meaning the account is not portable if an individual changes jobs. Eligible expenses for an FSA typically include co-payments, deductibles, prescription medications, and certain over-the-counter items, as outlined in IRS Publication 502.

Understanding HSA Cards

A Health Savings Account (HSA) is a tax-advantaged savings account for individuals enrolled in a High-Deductible Health Plan (HDHP). The HSA card provides direct access to the funds within the account for qualified medical expenses. Eligibility requires an HDHP, which for 2025 means having a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage, and a maximum out-of-pocket limit of $8,300 for self-only or $16,600 for family coverage.

HSAs offer a “triple tax advantage”: contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. Unlike FSAs, HSA funds are portable, belonging to the individual rather than the employer, and they never expire, allowing funds to accumulate over many years. Account holders also have the option to invest their HSA funds, potentially leading to long-term growth. Annual contribution limits for HSAs are higher than for FSAs, with 2025 limits at $4,300 for self-only coverage and $8,550 for family coverage, plus an additional $1,000 catch-up contribution for those aged 55 and older.

Comparing FSA and HSA Cards

Eligibility requirements are a primary distinction. FSAs are typically employer-sponsored benefits that do not require enrollment in a high-deductible health plan, making them accessible to a wider range of employees. In contrast, an HSA strictly requires an individual to be covered by an HSA-eligible High-Deductible Health Plan (HDHP) to contribute funds.

Account ownership and portability also differ. FSA funds are generally tied to the employer’s plan and are not portable if an individual leaves their job. HSA funds are owned by the individual and can be taken with them when changing employment or health plans. The rollover rules also differ considerably; FSAs traditionally operate under a “use-it-or-lose-it” rule, although employers may offer limited carryovers or grace periods. Conversely, HSA funds never expire and roll over indefinitely from year to year, allowing for long-term savings accumulation.

HSAs offer investment options for potential growth, similar to a retirement account; FSAs do not. Both accounts benefit from pre-tax contributions. HSAs provide an additional tax advantage through tax-free growth on investments and tax-free withdrawals for qualified medical expenses, effectively offering a triple tax benefit. Contribution limits also vary, with HSAs generally allowing for higher annual contributions than FSAs.

Practical Card Usage

Using an FSA or HSA card for qualified medical expenses is similar to using a regular debit card. When making a purchase, individuals can typically swipe the card and select “credit” or “debit” depending on the merchant’s system. The funds are then directly deducted from the available balance in the associated account.

It is important to retain receipts for all purchases made with these cards, as the Internal Revenue Service (IRS) may require substantiation to confirm the eligibility of expenses. If a card transaction is declined, common reasons include purchasing ineligible items, insufficient funds in the account, or a mismatch in billing details. In such cases, checking the account balance or contacting the plan administrator can help resolve the issue. If the card cannot be used directly, individuals often have the option to pay out-of-pocket and then submit a claim for reimbursement from their FSA or HSA account.