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Four Fees Your HSA Provider Might Not Be Telling You About

Four Fees Your HSA Provider Might Not Be Telling You About

 

When comparing HSA providers, knowing how much they’ll charge is a major consideration. And while some fees are easy to calculate, there are a couple of under-the-radar costs you may not know about until they come out of your account. We’ll show you what they are and how to find them.

 

Typical HSA Provider Fees

First, let’s quickly review the main fees HSA providers typically charge:

Administrative fee: This is the fee charged by your provider for managing your HSA. HealthSavings’ administrative fee is $45 per year.

Custodial fee: If you invest your HSA funds, you’ll often be charged a custodial fee for the service of safeguarding your assets. Typically, custodial fees vary by investment type. To find the custodial fees for your HealthSavings investments, go to our Investments page and click on your fund, then click “Fees” on the next page.

Transactional fees: These fees are typically charged for specific account-related actions. Typical examples are if an accountholder tries to make a purchase with non-sufficient funds or if they need to correct an excess contribution. See our transactional fees here.

 

Hidden HSA Provider Fees

Now, here are four other expenses you might not be aware of, but can be a significant cost (especially if you’re investing your HSA funds):

Expense ratios: This fee is taken out of your investment account annually by your fund company and covers the cost of operating the fund. Typically, expense ratios are measured as a percentage of the total funds in your account. If you have $10,000 invested in a fund with an 0.75% expense ratio, you’d lose $75 from your account that year. For instance, if you had a 6% return for the year ($600), your net return will only be $525 ($600 – $75).

Since expense ratios are deducted from funds’ returns rather than being charged as separate bills, they’re very easy to miss. You can find the expense ratio for a particular fund in that fund’s prospectus, and you can use this calculator to compare long-term costs of funds with different expense ratios. At HealthSavings, we pride ourselves in offering funds from both Vanguard and Dimensional, which have some of the lowest expense ratios on the market.

Investment transaction fees: Some HSA providers charge a fee for buying and selling shares in your investment account. Depending on how often you contribute to your investment account, this could really cost you. If your provider charges an $8 fee for buying shares, but you only contribute to your investment account annually, you only pay $8 per year. However, if you contribute to your investment account every month, you’re losing $8 each month in transaction fees ($96 per year). HealthSavings doesn’t charge any investment transaction fees, so you can contribute to your investment account worry-free.

Investment fees: Many HSA providers require accountholders to maintain a threshold in your cash account (this could be $1,000 or $5,000) in order to invest other funds. In addition, some HSA providers also charge an investment fee; if you don’t pay the fee, you can’t invest with the provider. If you’re looking to invest your funds, having a required minimum balance and investment fees will eat into your fund growth. HealthSavings doesn’t charge investment fees; we think everyone should have the opportunity to invest for the future.

Opportunity cost: This isn’t an actual fee, but it still can cost you. If your HSA provider requires a minimum balance for you to invest, your opportunity cost is the difference in what you could have made by investing those funds subtracted from what you made in interest.

For example, if your HSA provider had a $2,500 minimum cash balance, with an average market rate of 6% you would miss out on $150 (6% of $2,500) that year from not being able to invest those funds. Subtract the interest you made on that $2,500 from $150, and you’ll have that year’s opportunity cost. And your opportunity cost will increase each year due to compounding interest. The next year, you would miss out on $159 (6% of $2650, your initial $2,500 plus the $150 you could have gained the first year).

 

At HealthSavings, we think every dollar should have the chance to grow for you, so we offer first-dollar investing across the board, eliminating opportunity cost. And with over 50% of our customers investing their funds, we’ve seen the results of telling a different story by promoting HSAs as part of a holistic retirement strategy. Learn more about investing your HSA for the future here.

Author: James Denison