A Health Savings Account or more commonly known as an HSA, is a pre-tax savings account that allows you to set aside money to pay for qualified medical expenses. HSAs are generally offered through an employer as an employee perk and funds are deposited into the account before taxes are calculated. Many HSA providers also allow the funds to earn interest or to be invested in the stock market, allowing the funds to grow tax-deferred. HSA funds can be used to pay for deductibles, copayments, coinsurance, and other similar expenses, as long as the funds are used for qualified medical expenses. We've done the heavy lifting and sifted through the thousands of banks around the country to bring you the health savings accounts offering some of the best features and highest APYs for May 2025.
What is a health savings account?
An HSA is a tax-advantaged account that allows you to pay for eligible healthcare expenses such as copays, medications, dental treatment, eye care, etc. It's "tax-advantaged" because your contributions lower your taxable income, and the money stays in the account tax-free and even grows tax-deferred if the account provider allows the funds to earn interest or be invested in the stock market. If you use your HSA funds for eligible medical costs, you do not pay taxes when you withdraw money from the account.
Is a health savings account safe?
Generally speaking, yes. Most HSA account providers allow people to keep their funds in a cash or cash equivalent or also allow funds to be invested in the stock market. While maintaining the funds in cash doesn't expose funds to investment risk, there is an opportunity cost and inflation risk factor. When funds are invested in the stock market, it is possible to lose all funds if the underlying investments lose value.
Why are HSAs popular?
HSAs have become more popular due to rising healthcare premiums and associated costs. HSAs can only be used in conjunction with high-deductible health plans (HDHPs) that have lower premiums, thus reducing premium costs for employers and employees. Many employers are also offering matching contributions as an employment perk, thus subsidizing medical costs for employees.
Pros and cons of having a Health Savings Account
| Contributions can be deducted from your taxes. | There is an annual contribution limit for HSA accounts that is a combination of employer and employee contributions. |
| Many employers make matching contributions to their employee's HSA account. | Not all employers will provide a matching contribution. |
| Some HSA providers allow funds to be invested in the stock market for possible higher growth. | Any withdrawals made prior to reaching age 65 will be assessed a 20% penalty plus all funds are taxed at ordinary tax rates. |
| If you change employers, you can roll your HSA account to another HSA account with your new employer or maintain the account with the HSA provider. | Withdrawals made for non-qualified expenses after age 65 are subject to ordinary tax rates. |
| If you don't use your funds throughout the year, the funds are not lost and carry on like any other account. | |
| Starting at age 65, HSA funds can be used for non-qualified medical expenses. |
Frequently Asked Questions
Terms to know
High Deductible Health Plan (HDHP): A high-deductible health plan (HDHP) is one that has higher deductibles and out-of-pocket maximums compared to other plans. In exchange for reduced monthly rates, HDHPs force policyholders to pay more for medical expenses before the insurance company begins to reimburse them. Out-of-pocket expenditures include copayments and cost sharing, but not premiums.
Contribution Limits: This is the maximum amount you and your employer can contribute to your HSA on an annual basis. The contribution limit for 2023 is $3,850 for individual coverage and $7,750 for family coverage.
Minimum Opening Deposit: Depending on the bank, a minimum amount may be required to be deposited into a savings account just to open the account. Most online banks with lower overhead expenses do not require this but traditional banks might.
Qualified Medical Expenses: Qualified expenses often include doctor visits, prescriptions, medical equipment, and dental and vision care for you, your spouse, and any dependents.
Methodology
Our editorial staff continually updates the information contained on our website. Our editorial staff has analyzed virtually all of the banks and credit unions that it follows, and it does weekly rate analysis for more than 250 prominent banks and credit unions. These institutions were chosen because they provide competitive APYs, low fees, and other factors we find important. These banks and credit unions often provide accounts that are available nationally. All of these banks are FDIC-insured, and all of these credit unions are NCUA-insured. Choosing an FDIC-insured bank or an NCUA-backed credit union assures that your money is protected as long as it stays within insurance limits and requirements.