Home > Credit Score > FSA Card: What You Need to Know About This Financial Tool and Its Impact on Your Credit

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An FSA card is the debit card that allows you to access money in your flexible spending account. This is an account that is set up alongside your health insurance, and you can choose to have pretax dollars from your paycheck routed into it. Those funds can then be used to pay for certain qualifying medical expenses.

What Are the Benefits of an FSA?

The biggest benefit of a flexible spending account (FSA) is that it can reduce how much you pay in taxes. You don’t pay taxes on the money that is deposited into this account out of your paycheck. If you know you’ll spend all of the money on qualifying expenses within the time period required, you can cover medical costs you’d already have to pay for while lowering your tax burden.

Some people also like FSAs because they lighten the burden of health care costs throughout the year. If you put money from every paycheck into the FSA savings account, then it may be easier for you to pay for prescriptions, copays and deductibles later.

How Does a FSA Debit Card Work?

Flexible spending account options may be offered alongside your employer-sponsored health plans. They are also sometimes an option when you purchase insurance in the health care marketplace. However, you must choose to enroll in the FSA plan—it’s not an automatic part of your coverage, even when it’s available.

Once you enroll, you can decide how much of your pretax income you would like to contribute to the account. The IRS limits you to contributing $2,650 per year to this account. Someone who is married can contribute up to the same amount into their spouse’s FSA.

Once you fund your FSA, you can use the account to pay for eligible medical expenses or buy eligible qualifying products. One way of doing so is by using your FSA card just as you would use any debit or credit card at check out.

Remember to only use your FSA on eligible expenses, and keep your receipts and another backup. If you’re ever audited, the IRS may ask you to prove that you used your FSA money for approved spending.

What Items Are Eligible for FSA?

FSA funds are typically used to cover medical and health-related expenses. Some things you can use your FSA to cover include:

  • Payments to doctors, hospitals and other health care providers that are part of your copay or deductible
  • Any medication that is backed by a doctor’s prescription, including over-the-counter meds
  • Insulin, even without a prescription
  • Necessary medical equipment such as crutches or walkers
  • Diagnostic devices such as glucose monitors or blood pressure cuffs
  • Supplies such as bandages
  • Vision care, including eyeglasses or contact lenses

Can I Use My FSA Card Online?

Yes, you can use your FSA card for online spending, as long as it’s one of the eligible expenses listed above. That might include making a payment on a bill to your doctor’s office via an online portal or buying prescribed medical supplies via an online vendor.

Can I Get Cash Off My FSA Card?

In rare cases when you need to pay for qualifying expenses but the provider or store doesn’t take your FSA card, you can use your card to withdraw cash to make the payment. However, you must keep all the documentation proving that the amount you withdrew was used for eligible expenses. If you’re ever questioned by the FSA provider or the IRS about the withdrawal and you don’t have the supporting documentation, you may be required to payback those funds.

Are There Any Downsides to an FSA Card and Account?

The biggest disadvantage of an FSA account is that the funds are use-it-or-lose-it—even though it’s your money. FSA providers let you know what the deadline is for using all of your contributions from the year. They typically range from January through March of the following year.

Because you can’t simply withdraw the unused funds or spend them on something else instead, make sure that you estimate your medical expenses using as much information as you can. And when in doubt, estimate slightly lower so you aren’t left with a loss at the end of each year.

Is an FSA the Same Thing as an HSA?

An FSA and a health savings account (HSA) are slightly different. HSAs are only available to individuals with high deductible plans. Because of this, the contribution limits are higher. HSA balances also roll over to be used for the next year, unlike FSA balances.

Does Your FSA Card Impact Your Credit?

“While FSA cards look and behave like credit or debit cards where they’re accepted,” says credit scoring expert Barry Paperno, “like debit cards, they don’t appear on your credit report or get included in your credit scores. That’s primarily because they’re not truly credit accounts where a lender is making a loan to you. Rather, the FSA consists of money you have transferred, or will be transferring, from your paycheck.”

If you’re worried that your FSA might impact your credit score, it might be a sign of general anxiety about what’s on your credit report. Sign up at Credit.com to get access to your credit score and reports for greater peace of mind.

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