As more customers use Health Savings Accounts (HSAs) for medical expenses, businesses may wonder if accepting HSA payments comes with extra costs. While these cards function like regular debit cards, they have specific IRS requirements. Understanding how businesses process HSA card payments and whether additional fees apply can help merchants decide if offering this payment option is worth it.
How HSA Card Payments Work
An HSA is a tax-advantaged account that allows individuals to save on eligible medical expenses. These funds are often accessed through HSA debit cards, which function like regular debit cards but can only be used for qualified expenses.
Unlike credit cards, HSA cards pull funds directly from a customer’s HSA balance. The IRS requires that HSA transactions comply with strict guidelines, meaning businesses must ensure they only process HSA payments for eligible medical goods and services.
How HSA Cards Differ from Regular Debit Cards
- Restricted Use: HSA cards can only be used for IRS-approved medical expenses.
- Merchant Classification: Businesses must have a compatible merchant category code (MCC) that aligns with health-related spending.
- Transaction Coding: Payment processors must correctly identify eligible transactions for IRS compliance.
These differences raise an important question: Do these additional requirements lead to extra business fees?
Do Businesses Pay Extra Fees for HSA Transactions?
Major financial institutions issue most HSA debit cards and operate on existing Visa, Mastercard, or American Express networks. They are processed like regular debit card transactions, with similar interchange fees.
Most merchants’ standard processing fees for HSA transactions will be the same as those for regular debit card payments. If your business already accepts debit cards, there is usually no extra cost to process HSA payments through your existing system.
Additional Costs
While most businesses won’t see higher transaction fees, there are some additional costs to consider:
- Point-of-Sale (POS) System Upgrades: If your payment processor does not support HSA transactions, you may need to upgrade your POS system to code eligible purchases properly. Some businesses find that older POS systems cannot distinguish between HSA-eligible and non-eligible items.
- Merchant Category Code (MCC) Requirements: Some processors may require businesses to register under a specific MCC to process HSA card payments, which could involve a one-time setup fee.
- Compliance-Related Fees: Some payment processors offer compliance support or automatic eligibility verification, which may come with a small additional charge.
- Split-Tender Transactions: If customers purchase both HSA-eligible and non-eligible items, they may need to split their payment between their HSA card and another payment method. Some processors charge extra fees for handling these types of transactions.
While these additional costs are not direct transaction fees, they are factors businesses should consider when deciding whether to accept HSA payments.
Choosing the Right Payment Processor for HSA Transactions
Choosing the right payment processor is key if your business wants to process HSA payments without incurring unnecessary costs. Here’s what to look for:
- HSA-Compatible Processing: Ensure your processor recognizes and correctly codes HSA transactions to comply with IRS rules.
- Transparent Pricing: Look for a provider that does not charge additional fees specifically for HSA payments.
- Split-Tender Capability: Some processors allow customers to split transactions seamlessly, ensuring only eligible items are paid with HSA funds.
- HSA Auto-Reimbursement Features: Some processors offer an automatic reimbursement option. Customers can pay upfront with another method, and the processor submits a claim to reimburse them from their HSA account.
By selecting a processor with these features, businesses can accept HSA payments efficiently while minimizing unnecessary expenses.
Benefits vs. Costs of Accepting HSA Payments
Even if there are some minor setup costs, accepting HSA payments offers several advantages. As more people enroll in HSA programs each year, accepting HSA payments can help businesses attract a larger customer base. Customers using HSA funds are also more likely to spend on eligible products without hesitation, increasing sales. Offering HSA payments also improves the shopping experience, making transactions smoother for health-conscious consumers.
However, some businesses may need to upgrade their POS system to code transactions properly, and ensuring compliance with IRS regulations may require minor administrative adjustments. Despite these potential costs, the ability to serve more customers and drive higher sales often makes HSA payment acceptance a worthwhile investment.
For most businesses selling HSA-eligible goods and services, these costs are minimal compared to the long-term benefits of attracting more customers and increasing sales.