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How Do I Decide Which HSA is Best for Me?

Have a high deductible health plan (HDHP)? Ready to start (really) taking advantage of it? Here's how to choose the HSA that's best for you.
by Shannan Seely May 28, 2020

Once you enroll in an HSA-eligible high-deductible health plan (HDHP), you’ll want to open a health savings account (HSA), which lets you set aside pretax dollars for eligible medical expenses. The IRS regulates HSA funds just like other retirement investment accounts… but that doesn’t mean all of these accounts are created equal. 

Here’s a list of top criteria to scrutinize when choosing an HSA, as well as some factors and features you’ll want to consider.

Types of HSAs

To start, you’ll want to check with your employer about what HSA option they offer. With an employer-sponsored HSA, your company can easily make contributions and you can specify the amount of money from your paycheck you want to contribute to your account. Please note that if you have an individual HSA, you may be required to transfer funds over from your employer-sponsored account, and that could mean fees… so just be aware.

All that said, some plans may provide better options than your employer-sponsored HSA. So simply sticking with an HSA offered by your bank or credit union may not be your best bet. It’s still important to shop around to find the HSA best for you.

You can also use an HSA comparison tool like HSA Search to research HSA providers and narrow your field. Of course, we’re partial to Starship HSA, but we’ll let you make your own decision 😉

Use Cases

Finding the perfect HSA for you and your family depends on how you want to use the money in your account. Are you planning to use it to pay for this year’s medical expenses? If so, conduct your research like you would for a bank account, keeping a special eye on fees and interest rates (more on that in a second). 

Alternatively, are you setting up the HSA in order to use funds in the distant future? If so, you’re probably focused on saving and investing. An HSA is both a full-powered flexible spending account that never expires as well as an exceptional retirement savings fund. If you’re in this camp, you’ll need to look for an HSA that offers an expansive menu of investment options.

Understanding Fees

Fees can add up and cut into your earnings. Some fees common among HSAs are the following: a charge to open or close an account, to transfer funds, or to obtain a debit card. 

Starship doesn’t charge for any of those things, but others do. We’re more ‘no minimum balance, no monthly fees, and no extra card fee’ type of people. So if you’re looking to invest your HSA funds, make sure you check out the fees pertaining to investing in particular.

It’s wishful thinking to see an investment fund with no fees, but here’s the good news: finding lower fees is very possible.

There are upfront charges, such as monthly account fees, trading fees, and investment fees. And always be aware of hidden fees like account-inactivity fees and closing fees. But again, we’re happy to report that Starship is an exception. No hidden fees (ever). 

Providers generally charge an automatic investing fee, which can be as much as $4 a month or more. Starship has a very transparent fee structure that makes sense: we charge a small fee, paying 0.5% on the funds in a Starship Investing Account (a mere $1 for $2,000 balance).

Be aware, also, of trading fees. They can add up. At Starship, investors love our ETFs (exchange-traded funds) due to their low cost, trade flexibility, and excellent performance track record. With us, you pay the small fee that’s built into the low-fee ETFs we purchase for you (about 0.2%).

Compare Interest Rates

Research the APY (annual percentage yield) when you’re examining the performance of spending accounts among HSAs. The APY gives you the rate of return you earn on your money in a deposit account over a year including the effect of compounding. It’s a yardstick to make a true comparison between the two funds. And if you’re cautious about investing, looking for the fund offering the highest interest rate is a smart move.

The interest rate of your Starship Spending Account varies across two tiers and is compounded daily on the end-of-day balance. When you jump to Tier 2 by saving a minimum of $2,000, you’ll pump up your earnings. The Tiers look like this: 

  • Tier 1: 0.01% APY for balances $0 – $1,999.99.
  • Tier 2: .25% APY for balances $2,000 and above.

This is just a taste of what you need to look for when you’re shopping for the best HSA for you. But the most important thing is to start saving money now, if you can, and get contributing to your HSA!

Note: Balances in your Starship Spending Account (“Spending”) earn .01% Annual Percentage Yield (“APY”) on deposit balances $0.01 – $1,999.99 and .25% APY on deposit balances $2,000 and above. We use the Spending account’s end of day balance to calculate the interest earned that day. The rates are effective as of March 6, 2020, are variable and subject to change after the account is opened. Accounts subject to approval.

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