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Maximize HSA Benefit by Using a Rewards Credit Card

By on February 28, 2014 in Money

Maximize HSA Benefit by Using a Rewards Credit CardSetting aside money on a pre-tax basis into a health savings account is a smart thing to do if you are a participant in a high deductible health plan. As long as you use the funds for specific healthcare costs allowed by government regulations, you will never pay tax on the money you set aside. Your HSA contributions never expire, either, so money you set aside today can be used 20 years from now as long as it is for spending that is allowed under HSA regulations.

When you sign up for your health savings account, the bank providing the account will generate an account number for you and mail you a debit card. After activation of the debit card using your funds is as simple as swiping the card at the pharmacy or doctor’s office.

As convenient as the HSA debit card is, if that is the only way you use your contributed funds you are missing a big reward of using a health savings account.

How to Maximize Rewards with Your HSA

The easiest way for you to get funds out of your HSA is to swipe your debit card for medical expenses. However, many people do not realize there is an extra way to get funds from your health savings account. The second way involves spending money in some other way that doesn’t involve the HSA debit card and requesting reimbursement from the bank.

This simple twist on using a health savings account can lead to a lot of extra rewards if you use a credit card rather than the HSA debit card.

How to Use a Credit Card with your Health Savings Account

Reward credit cards are great if you never pay interest or finance charges with them. If you normally treat your airline miles card, hotel points card, or cash back credit card like a debit card – by never carrying a balance and paying off your charges at the end of the month – you can essentially double dip with your health savings account.

It couldn’t be more simple, either. Here are the 5 steps to using a credit card with your health savings account:

  1. Simply use your reward credit card for your HSA-allowable healthcare spending
  2. Keep the receipt from the transaction
  3. When you get home, login to your HSA account’s online access
  4. Document the transaction and any other recent HSA-allowable transactions under the request reimbursement function
  5. Click request reimbursement

(Your HSA online access may differ slightly in how reimbursement works, but this is the general idea.)

It may seem like a small difference, but it could add up to significant dollars for you and your family. An individual that spends $2,000 on prescriptions at a pharmacy through his HSA each year that also has a credit card that gives 5% back at pharmacies would net $100 in extra cash back by using this process. As long as he paid the bill off before incurring any interest charges and remembered to submit his receipt for reimbursement, he just earned $100 for nothing.

Alternatively a family that hits and spends the $6,450 contribution each year could earn an extra 6,450 airline miles, hotel points, or $64.50 on a 1% cash back card.

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