Finance Charges: HSA Eligibility

What are finance charges?

Medical expenses can result in finance charges, which are not reimbursable through consumer-directed healthcare accounts. Finance charges may also be applied to medical expenses that have been paid up-front through a loan from the medical institution or a third party lender (Investopedia).

The most common type of finance charge is a percentage-based figure applied to the amount borrowed to pay for a medical expense. The percentage varies based on several factors, including the nature of the medical expense, income, repayment terms, and more. Finance charges may also be applied in the form of flat fee. Finance charges are usually intended to cover the costs experienced by the lending institution as it extends money to pay for the medical expense.

Finance charges represent the cost of credit or the cost of borrowing. In addition to administrative costs experienced by the lending institutions, finance charges may also represent interest, though interest is typically represented as a separate expense.

State law may affect which types of medical expenses may result in finance charges.

Finance charges may increase with medical expenses that aren't repaid on time. Regardless of the nature of the finance charges, the expense is not reimbursable under any consumer-directed healthcare account. Finance charges accrued by paying medical expenses with a credit card also are not eligible. When reimbursing medical expenses paid by credit card, users should properly account for costs and ensure that finance charges are not being reimbursed by consumer-directed healthcare account funds. Finance charges, regardless of whether they originate through a credit card or third party loan or something else, may not be reimbursed with consumer-directed healthcare accounts.