Best Health Savings Account (HSA) for Your Money

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Health savings accounts or HSAs can offer big tax advantages while helping to cover your health care and medical expenses. Choosing the right HSA will also protect your savings for your retirement and allow you to grow your savings tax-free.

How to Find the Best Health Savings Account

There are hundreds of HSA accounts out there, understanding how to find the best one for your current circumstances is the key to getting the best one. Many factors will come into play, including:

  • How easy it is to manage and access your health savings account—will the account provide you with a debit card?
  • How you use the money—are you saving or spending it? You can use the money in your health savings account for your health care or medical expenses, but the amount you expect to actually use every year, and your spending pattern, will dictate it. 
  • Whether you can invest 100% of your money or only a portion
  • What the minimum balance requirements are
  • Monthly fees, set up fees, account closing fees, and monthly maintenance fees
  • Interest rates
  • Eligibility

The above factors give you an overview of key things to consider when looking for the best HSA, but the most important thing to get you pointed in the right direction is to determine:

  1. Will you be using your HSA for savings or investing?
  2. Will your HSA be primarily for spending? 

The Best HSAs for Spending and Investing

Morningstar released its 2019 HSA report in October 2019. The top HSA account choices are based on assessments of the 11 largest HSA plan providers and they are divided and ranked based on whether they're the best for spending or saving/investing. According to Morningstar's 2019 report, the top HSA for both savings and investments is Fidelity.

Top HSA Accounts for Spending Top HSA Accounts for Investing
Fidelity Fidelity
Lively The HSA Authority
The HSA Authority Bank of America
HealthEquity Further
HSA Bank Fifth Third
Optum HealthSavings Administrators
UMB Bank HealthEquity
Fifth Third UMB Bank
Bank of America HSA Bank
Further Optum
HealthSavings Administrators  

For the top HSAs for spending, Morningstar reviewed maintenance fees, interest rates, and additional fees. Fidelity won the top rank in all categories, followed by Lively which ranked well in maintenance and additional fees, with a neutral score on Interest Rates.

For the top HSAs for investing, Morningstar reviewed menu design, quality of investments, price, performance, and investment threshold. Fidelity and The HSA Authority scored well across the board, with Fidelity ranking neutral for menu design and The HSA Authority ranking negative in menu design. But in both cases, the overall assessment was positive.

HSAs for Saving and Investments

In scenarios where you expect to maintain a specific balance or are able to use your HSA to save money, look for:

  • An account that offers a fee waiver when you maintain the minimum balance
  • Accounts with a good interest rate and low fees

HSAs being used for investments and savings will offer you investment options. Some people may think that the one with the most options is the best, however, having too many options may be confusing, It is important to also assess for yourself how easy the menu options for investments will be for you to understand and navigate.

HSAs for Spending

Typically people looking for HSAs that are good for spending will be looking to use their HSA like a regular bank account to pay medical bills. Therefore, the interest rates being paid on the "savings" would not be the driving factor in finding yourself the best HSA.

In this scenario, you may want an HSA that has low to no monthly account fees, functions very much like a checking account, and ideally allows you to use a debit card to pay your medical bills.

According to Morningstar's 2019 report, the following were the top three HSAs offering checking accounts for spenders that had no monthly account fees for accounts with values less than $10,000:

  1. Fidelity
  2. Lively
  3. The HSA Authority

When Is a "No Interest" HSA a Good Idea?

Choosing an HSA for spending but placing your focus on the interest could cost you a lot of money. The strategy to evaluate which HSA is best for you depends on how you will be using it. If your HSA is not going to have high balances because you are spending from it, then the impact of the interest rate will be countered by your monthly fees and may cost you more.

For example, if you have $2,000 in the bank, and you pay $54 in annual fees for an account with "interest" but you only make $2 in interest on your balance after one year, then you've actually lost $52 on that account. This is versus a no-interest, no-fees account, where you would at least get to keep all your money.

The Bottom Line

A good HSA will provide you with the most spending power for your dollar. HSAs give you the opportunity to deposit, save, and spend the money tax-free, which increases the buying power of your dollar.

HSAs, when used as planned, can offer more tax advantages than 401(k)s, traditional IRAs, or Roth IRAs. When you get into using your HSA for investing and savings, you have the opportunity to grow your savings tax-free as well.

At the end of the day, the best HSA for you will depend on whether you spend or save and will be different than the best one someone else.

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