Banking 101: How to Choose the Best Health Savings Account (HSA)

Are you enrolled in a high deductible health insurance plan (HDHP)? If so, you might want to consider contributing to a health savings account (HSA). This specialized deposit account type can help you cover certain health care expenses on a tax-free basis. Plus, the best health savings accounts come with added benefits, like competitive interest rates and no fees, which can further boost your savings.

The 6 best HSA accounts in 2020

The high-deductible health insurance plan you have through your employer might already come with an HSA. While this may be the only HSA you can use at the moment to make direct contributions from your paycheck and receive contributions from your employer, it might not be the best health savings account available for you.

Fortunately, you don’t have to stick with your employer's account. The IRS allows you to roll money from one HSA into another on a tax-free basis once a year. Best of all, this transfer does not count toward your annual contribution limit. 

We have sourced this list from DepositAccounts.com’s listing of the top HSAs available nationwide, ranked by highest APY. Here are some of the best health savings accounts to consider as you shop around for better rates.

Evansville Teachers FCU

A health savings account with Evansville Teachers FCU makes it easy to pay for expenses using a debit card or checks — plus, the account comes with no annual fees. There’s no minimum balance required to open the HSA, you’ll need at least $500 in the account to earn the 2.01% APY. 

Evansville Teachers FCU has branches in Indiana, Kentucky and Tennessee. The credit union has a field of membership that includes more than 200 select employer groups, including the Evansville Museum and the Evansville Teachers Association, and allows employees and their immediate family to join. To those who may otherwise be ineligible, membership is also open by making a $5 donation to Mater Dei Friends & Alumni Association, an affinity group for a local Evansville Catholic high school.

Connexus Credit Union

The 2.00% APY makes Connexus Credit Union one of the best health savings account options right now. While there’s no minimum balance on the account, you’ll need at least $15,000 if you want to earn the top APY. Lower balances earn at the following rates:

• $100 to $499.99 earns 0.50% APY
• $500 to $4,499.99 earns 1.00% APY
• $5,000 to $14,999.99 earns 1.50% APY

Connexus provides debit cards to HSA holders upon request. The credit union has branches in New Hampshire, Ohio, Wisconsin and Minnesota; however, some of these branches are for Liberty Mutual employees only. Customers can make some transactions at more than 5,600 branches of the CO-OP Shared Branch network. There are also more than 54,000 ATMs in network with Connexus that members can use without paying a surcharge.

Membership in Connexus Credit Union is open to members of certain communities, employees and retirees of a few companies (such as Liberty Mutual and Honeywell) and anyone through becoming a member of the Connexus Association with a $5 donation.

IncredibleBank

IncredibleBank rewards customers who keep at least $25,000 in their HSA with 1.61% APY. You can also earn interest with lower balances at the following rates:

• $1,000 to $9,999.99 earns 0.50% APY
• $10,000 to $24,999.99 earns 0.80% APY 

The account also comes with a debit card or checks you can use to spend your HSA funds.

IncredibleBank started in 1967 as River Valley Bank, with a single branch in central Wisconsin. It became IncredibleBank in 2009 and now runs 15 branches in the state of Wisconsin and on Michigan’s Upper Peninsula.

NASA Federal Credit Union

NASA Federal Credit Union pays up to 1.55% APY on health savings accounts with balances of at least $100,000. If your account has a lower balance, you can still earn interest at attractie rates: 

• $0.01 to $9,999.99 earns 1.00% APY
• $10,000 to $24,999.99 earns 1.10% APY
• $25,000 to $49,999.99 earns 1.35% APY
• $50,000 to $99,999.99 earns 1.45% APY 

HSAs at NASA FCU include a free debit card and come with no monthly or annual service fees. NASA FSU has locations around the Washington, D.C. metro area, and gives members access to the CO-OP network of ATMs and branches.

Starting with just $2 in deposits in 1949, NASA Federal Credit Union now has more than 177,000 members. It offers membership to anyone who becomes a member of the National Space Society, a non-profit organization that aims to create a spacefaring civilization.

Savings Bank of Danbury

Customers with a health savings account at Savings Bank of Danbury can earn 1.25% APY with account balances of $10,000 or more, though you’ll only need to make a deposit of at least $25 to open the account. The bank also offers lower APYs on smaller HSA balances:

• $0.01 to $1,499.99 earns 0.25% APY
• $1,500 to $2,499.99 earns 0.50% APY
• $2,500 to $4,999.99 earns 0.75% APY
• $5,000 to $9,999.99 earns 1.00% APY

Savings Bank of Danbury traces its history back to 1849. It’s headquartered in Danbury, Conn., and has a total of 15 branch offices throughout western Connecticut. The bank lets customers use their debit cards in the Allpoint ATM network, which includes one out of every 12 ATMs in the country. Customers can access around 55,000 surcharge-free ATMs in North America.

Interior FCU

Interior FCU pays a competitive 1.25% APY on health savings accounts with balances of at least $25,000. Plus, you won’t need to worry about a minimum opening deposit or annual fees on a health savings account from Interior FCU. HSA with lower balances earn the following:

• $0.01 to $1,999.99 earns 0.25% APY
• $2,000 to $4,999.99 earns 0.51% APY
• $5,000 to $14,999.99 earns 0.75% APY
• $15,000 to $24,999.99 earns 0.95% APY

While Interior FCU only has two physical locations — in Washington, D.C. and nearby Reston, Va. — the financial services provider also gives members access to 5,600-plus shared branches/service centers. Customers can use their debit cards at more than 55,000 fee-free ATMs around the world. 

You’ll need a Primary Savings account at Interior FCU before you can open a health savings account. Anyone can join the credit union by becoming a member of the New Mexico Wildlife Federation; check website for further opportunities for eligibility.

How to find your best health savings account

You should begin your search for a health savings account by considering how you plan to use it. Will you be spending your HSA contributions in the near future? Or do you plan to use your HSA as an investment tool?

• Spending HSA: Do you anticipate using your HSA funds to cover qualified medical expenses, like allergy testing, braces or lab fees? If so, the best health savings account for you might be one geared toward spending. Look for an account that allows you to easily access the money with a debit card or online payment system. Shop around to find one with no maintenance fees and a decent interest rate to maximize your savings.
• Investing HSA: HSAs offer triple-tax savings that can make them a compelling investment tool. Not only are your contributions tax-deductible, but so are your earnings and withdrawals when used for a qualified medical expense. The best health savings accounts for growing your money over time will give you the opportunity to invest in a variety of products, such as mutual funds or ETFs. Do note, however, that these accounts may come with transaction fees and other hidden costs, so take some time to find a competitive product.

HSA eligibility rules

Only people who have an HDHP and no other health coverage, including Medicare, can open a health savings account. For 2020, health plans with annual deductibles between $1,400 and $6,900 for individuals or between $2,800 and $13,800 for families count as HDHPs. You also can’t be listed as a dependent on anyone else’s tax return if you want to open an HSA.

HSA contribution limits

The IRS has given HSA contribution limits a bump for 2020. People with self-only coverage can contribute up to $3,550 (a $50 increase from 2019), while those with family coverage max out at $7,100 in contributions (up an additional $100 from last year). These limits include any contributions your employer may make to your health savings account. People aged 55 and older can contribute an additional $1,000 per year.

If you haven’t yet hit your HSA contribution limit for 2019, you and your employer can continue adding funds until April 15, 2020, for that tax year. Also, you’re allowed to make a one-time, tax-free transfer of money from your IRA to your HSA, as long as you have an HDHP for 13 months after the transfer.

What can you spend HSA funds on?

The money in your HSA can be used for many types of medical expenses, such as physical therapy, vision correction and first aid supplies. Be careful not to use money in your HSA for a non-eligible expense, or you may be subject to a 20% penalty from the IRS.

If you want to make the most of your HSA, try not to touch the funds — even for an HSA-qualified expense. It’s estimated that the average couple can expect to spend hundreds of thousands of dollars in health care during retirement. Leaving your contributions in a health savings accounts now may allow your money to grow into a nice nest egg you can use for expenses down the road. 

After your 65th birthday, you can spend the money in your HSA on anything you want with no penalty. However, you may still need to pay income taxes on the money if you spend it on something besides a qualified health care expense.

Rates are accurate as of January 9, 2020.