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If you have or are about to receive access to your Flexible Spending Account, you may need some basic information regarding FSA debit cards and how to use them. This will help you understand the benefits and limitations of FSA funds and how you can manage them in your day-to-day life.
In this article, we will explain what exactly an FSA card is, how to use it, and answer some common questions regarding this payment method.
What Is a Flexible Spending Account?
Flexible Spending Accounts are used by employees to pay for their health expenses. Also known as the Flexible Spending Arrangement, this account was created to accommodate payments towards eligible medical expenses, like copayments, deductibles, or drugs.
FSA is one of the tax-advantaged financial accounts, meaning you are not obligated to pay taxes on this money. But, FSA funds need to be used by the end of each year, otherwise, they are relinquished by the employer.
FSA is similar to a Health Savings Account (HSA) or a Health Reimbursement Account (HRA), but there are some differences between these accounts. One of the major distinctions between FSAs and HSAs is that the first one can be used with more traditional health plans, while HRA and HSA are reserved as components mostly for consumer-driven health care plans.
FSAs and HSAa let you set aside pre-tax money that can be used by you to cover some out-of-pocket medical expenses, and an FSA card is a valuable tool that allows you to manage this cash.
But how exactly can you do that?
What Is a FSA Card?
An FSA card is used to withdraw funds from an FSA in order to pay for health care services.
You don’t necessarily need an FSA card to use your FSA funds, as there is an option to pay for various healthcare services and eligible items out of pocket and then apply for reimbursement by providing the necessary documentation.
But this route is more complicated and involves a lot of paperwork, as well as forces employees to pay for their health care from their paycheck before they get reimbursed.
To make this whole process easier, FSA cards were introduced.
Thanks to an FSA card, you can pay for FSA-eligible expenses by automatically withdrawing funds from the debit card.
All FSA cards are supported by MasterCard, Visa, or Discover. These cards are also used to access the funds from HRAs and HSAs, and the way they are used stays the same for every account of this kind.
Most FSA cards are issued to help pay for various eligible health care expenses that are not included in your health care plan, but they can also be used to cover the costs of dependent care and transportation expenses.
An FSA card is a great convenience for an employee who doesn’t have to go through the entire process of applying for reimbursement when paying for medical services. The Internal Revenue Service (IRS) uses these cards to automate the substantiation requirements, using the card transactions to perform “auto-adjudications.”
And when you make transactions with approved merchants, you will not be required to provide additional documentation, as this purchase will likely get auto-approved.
All of this means that there is usually less paperwork and complications involved with using the funds from health savings accounts. This is why having and using an FSA card makes a lot of sense.
How To Use an FSA Card?
To be able to benefit from FSA, you first need to enroll in the FSA plan. You may be able to choose this plan alongside your employer’s health plans. When you decide to enroll in the plan, you will be asked to decide how much of your pre-tax income should be spent to cover the out-of-pocket medical expenses.
Once that is done, you are free to use your FSA card to pay for eligible items and medical services. Although the principle of operation here is the same as with any other debit card, you won’t be able to pay with this card for services and items in every store or medical facility.
Only approved items can be covered with money from an FSA, which is the biggest difference between FSA cards and traditional debit cards.
How To Check the Balance on Your FSA Card?
One of the more common concerns for debit card users is checking the balance on their accounts. If you want to check the balance of your FSA card, you can do so by:
- logging into your FSA plan portal
- calling the number of your FSA provider
- using the FSA app to access your account
As you can see, it’s not an overly complicated process. You can access this information in a matter of minutes and know exactly how much money there is still left on your FSA.
Where Can You Use FSA Debit Cards?
As we’ve mentioned already, there are certain limitations to where you are able to use an FSA debit card. Only eligible sellers and facilities accept payments with FSA debit cards. On the list of these entities, we will find:
- medical providers, such as doctors and hospitals
- stores that have pharmacies
- merchants with an inventory information approval system (IIAS)
Remember that you should keep all your receipts when paying with an FSA card in order to be able to provide all the essential documentation to the IRS if asked. This is also your backup in situations when you wish to be reimbursed.
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What Items Are Eligible for FSA?
The general rule is that you can pay with an FSA card for medical services and items that are not included in your health plan. Amongst FSA-eligible items, there are:
- medical services, doctor visits, and dental expenses for you, your spouse, and your dependents
- your deductibles and copayments, but not your health insurance premiums
- prescription medications and over-the-counter medications if you have a doctor’s prescription
- insulin, even without a prescription
- various medical equipment
- medical supplies
- vision expenses, including vision aid such as eyeglasses or contact lenses
When Paying with an FSA Card Is Not Possible?
It’s crucial to know when your FSA card can be used, but it’s equally important to be aware of the instances when it’s not suitable to make payments.
You can’t pay with your FSA card for medical services if you’re enrolled in one of the Marketplace plans. Or, more specifically, you won’t be able to pay for such services from your Flexible Spending Account.
Instead, you can benefit from the Health Savings Accounts, which is designed to cover the costs of eligible items that are not covered by a Marketplace plan.
Another aspect that differentiates an FSA debit card from most debit cards is the fact that you’re not able to use it to withdraw money from an ATM. Similarly, your FSA card will be of no use to you in stores and facilities that don’t accept this form of payment.
Only entities which offer products and services eligible for FSA reimbursement can facilitate payments with an FSA card. You can make transactions with it at your doctor’s office, dentist’s office, pharmacies, and some stores.
How To Keep Your FSA Card Safe
For the majority of people, paying for health care services comes with a certain amount of planning. After all, these are essential costs, and often they can be quite substantial if one does not benefit from some form of health insurance and the company’s benefits.
With that in mind, ensuring the safety of your FSA debit card is rather important. Losing access to your account or losing funds from FSA may force you to pay for some healthcare services and items from your paycheck till the end of the plan year.
So, what can you do to protect your FSA card and account from theft and hacking?
There are several safety measures you can put in place, most of which are identical to those used to protect your traditional debit card.
- Keep an FSA card in a safe place. This should be a place known only to you, so those who are unauthorized can’t access it.
- Don’t share with others your card number, PIN, or other sensitive information regarding the card and your FSA. It’s especially alarming if someone asks you to give this information while on a call. The only time it is safe to offer this information is when you are calling a business or facility, as in this scenario, you know who you are talking to.
- You should never send your FSA card number via email. This is not a secure way to send information, as emails can be easily hacked. Additionally, not a single reputable entity would ask you to send this information through email, so if you see such a request, you have every reason to be cautious.
- Always make transactions through secured connections. Don’t use public Wi-Fi networks when paying with an FSA card because you’re exposing yourself to hacker attacks and increasing the risk of information leakage and theft.
Limits and Grace Periods
If you wish to benefit from FSA to the fullest, you must use all the money in your account within the plan year. In other cases, the “use it or lose it” rule is implemented, and the money that is left is transferred to your employer.
But your employer may decide to offer you a grace period. In this situation, you get an additional two and a half months to spend the pre-tax dollars from your FSA.
Additionally, there is an option to carry up to $610 per year to the next plan year.
Both options are offered to employees by the employer on a voluntary basis, and it’s not possible to benefit from both at the same time.
What To Do When Your FSA Card Gets Declined?
Sometimes you may encounter the situation when your FSA card is declined. It’s not a pleasant occurrence, but there are some things you can do to amend it.
First, you should check if your FSA card is active. People often forget about this step, but fortunately, it’s a quick fix.
If that is not the problem, the next thing you want to do is check whether the entity you’re buying from accepts FSA transactions. Most of the time, it is straightforward. Places like hospitals, doctor’s offices, or pharmacies are where transactions with this card are allowed.
But in a store that sells only some FSA-eligible items, this may be more confusing. It’s close to impossible to pay for completely non-medical-related items and services with an FSA card, so if, for example, you’re at the car shop, it’s very likely that your transaction will be declined.
If you know for a fact that your FSA card should be accepted, you can also check your balance. Memory can be unreliable, so it’s possible you might not have as much money in the account as you thought.
Another option is to contact your employer to check the eligibility of a particular item. Contact your FSA provider to see whether or not you have the right to pay for it with the card. If not, you can purchase it via your debit card and apply for reimbursement later.
Does Your FSA Card Impact Your Credit Score?
No, an FSA card will not impact your credit history. It’s because it’s not really a credit card. You’re not lending money to make purchases. You’re using money from your income that is transferred to your FSA.
Is an FSA the Same Thing as an HSA?
No, these benefits are not the same, although they are similar. Health savings accounts are used with more traditional health plans, whereas HSAs are designed for high deductible plans.
Unlike FSAs, HSA money can be transferred from one plan year to another. The contribution limits are also higher with HSAs, and HSA can be combined with a High Deductible Health Plan.
An FSA debit card is a valuable tool for making transactions in stores, pharmacies, and medical facilities. You can use it just as you would use a traditional debit card, with some limitations in place.
If you’re enrolled in FSA, then having an FSA card is the best way to pay for the eligible items. You’re saving time, stress, and paperwork.
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