FSA Debit Cards vs. Bank Debit Cards: When to Use Each

If you have money left on your FSA debit card, now is a good time to put it in your wallet alongside your regular bank debit card. The end of the year is the annual deadline to spend your FSA funds.

You probably have an FSA card if you have a flexible spending account, an employee benefit that lets you deduct money from your paychecks tax-free for out-of-pocket health care costs. The FSA debit card may look like a regular bank card, but it can be used for health expenses only. The eligibility list is generous, however. Your next doctor’s visit copay, prescription refill or box of bandages could all be covered.

People who don’t use up their funds often leave an estimated $50 to $100 behind, according to representatives from FSAStore.com, an online site that specializes in eligible health care products.

There are advantages to using an FSA card to draw down your account, but in some situations, it’s better to use the card from your bank or other form of payment, then file a claim to be reimbursed. Here are some of the best times to use each.

When to use an FSA debit card

Use your FSA card to pay for health expenses you don’t want taken from your regular bank account. This can make it easier to manage your budget, says Paul Miller, a certified public accountant and owner of Miller and Company, an accounting firm in New York.

Looking ahead to next year, you can use the card even if your bill is larger than the amount of your year-to-date FSA payroll deductions. Say you have a surprise emergency room visit in January and need to pay $400 out of pocket for your copay, prescriptions and medical equipment.

The FSA card is there for you, provided you signed up for at least $400 to be deducted from your paychecks throughout the year. In this case, there’s no need to take cash from your emergency fund.

Using an FSA debit card can also reduce claims paperwork. Many merchants that accept the cards have inventory systems that communicate with the customer’s employer’s plan administrator so eligibility information is sent electronically, says Rachel Rouleau, director of compliance at FSAStore.com.

“They can verify that your purchase is eligible, so you don’t have to fill out extra paperwork to file a claim and get reimbursed. The majority of shoppers use their FSA cards to pay on our site,” she says.

Even if a purchase is approved by a merchant, your administrator might still want to verify the purchase. Be sure to keep detailed receipts, including the type of service or product, provider, cost and the service date.

When to use a bank debit card

You will likely have to use a personal debit card or other form of payment if you have an eligible expense from a provider that doesn’t have the required inventory system. Ask your provider if they accept FSA debit cards. If they don’t, your FSA debit transaction might be declined.

Say your doctor recommends a round of massage therapy. If your massage therapist isn’t set up to receive FSA debit cards, you would have to pay a different way, then file a claim. You’ll submit documentation, including details about the transaction — along with any doctor’s note — then wait a few days or weeks for approval and reimbursement.

Another reason to use a debit card, or even a credit card, is to maximize any available perks. Your FSA account will reimburse you for expenses — you’ll only have to file a claim — and for that effort, you could earn points, miles or cash back.

Why it's good to have both cards

There are times to use an FSA card, and other situations when it makes sense to use your personal debit card. The most important thing is to make sure you spend all the money in your FSA account for the year.

Flexible spending accounts have a “use it or lose it” policy, per federal guidelines. This means the money disappears if it isn’t spent in the plan year, though some employers offer a grace period that extends into the following March. Other employers may also let you carry over some of your balance into the next year.

If you have a flexible spending account, it’s in your best interest to take advantage of it by spending the funds before you lose them.