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Jet Ski Financing: How Does It Work?

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Do you have your heart set on a new jet ski this summer? With prices stretching to nearly $15,000 apiece — and you may want more than one for families — you may be busy researching jet ski financing options to turn your daydreams into reality.

Getting jet ski financing isn’t difficult. In fact, it’s similar to financing most other recreational vehicles. But some methods are better than others, depending on your particular situation. We’ll walk you through some affordable ways to finance your purchase and some options you would probably be wise to avoid. Keep reading to compare your choices using our side-by-side chart.

How to finance your jet ski

As with any type of financing, the better your credit rating, the more attractive the options you may have available to you.

  • Manufacturer financing
    Vehicle manufacturers are known for offering attractive interest rates for well-qualified borrowers as an incentive to purchase certain products or models. Whether you’re buying a jet ski or another type of vehicle, financing through the manufacturer will often be the most affordable way to go — if you have good credit. In fact, with good credit scores you might even be able to score 0% APR financing through a manufacturer, albeit likely for a shorter loan term (e.g. 12 months) or introductory period. Keep in mind, that low initial APR could jump to a much higher rate if you need more time to pay off your loan.
  • Powersport loans
    Banks, credit unions and online lenders will offer loans for jet skis under different names including specialty vehicles, sport or leisure vehicles. These loans may have higher rates than manufacturer financing incentives but typically come with lower interest rates than personal loans, which we’ll talk about next. If you’re comparing rates on powersport loans with manufacturer loans, remember that your rate on a manufacturer loan may change over time. Calculate your total interest over the life of the loan to see which option may give you the lowest cost for financing. We recently found powersport loan rates as low as 4.29% APR with more offers around 5% and 6% APR though again, the best rates tend to go to those with the best credit and for the shortest terms.
  • Personal loans
    Many banks and online lenders offer personal loans which can be used to finance a jet ski purchase. If your credit scores are in less-than-perfect condition, you might have an easier time qualifying for a personal loan (depending upon each lender’s requirements) when compared with other borrowing alternatives. However, if your credit scores are in great shape, there’s a chance you might be able to find a more affordable way to finance your jet ski purchase.A personal loan also might be your best bet if you’re looking to buy a used jet ski that you can’t — or don’t want to — pay for with cash. Some banks may have minimum amounts for powersport loans but lower requirements for personal loans.
  • Credit cards
    Although it may technically be possible to use a credit card to finance your jet ski purchase, it’s usually not a good idea. Unless you have an attractive introductory rate offer, credit cards are a notoriously expensive way to finance big purchases. Also, if your debt-to-limit ratio climbs higher because of an expensive purchase, your credit scores could suffer until you’re able to pay down your card balance. “Putting a big, fun purchase on a credit card is tempting, but it may be a costly mistake,” said Eric Rosenberg, founder and editor at Personal Profitability. “Unlike a mortgage or a car loan, where you get a lower interest rate because the loan is secured by the vehicle, that isn’t true with a credit card. You could easily find yourself paying 20% or more to pay off that jet ski. No amount of fun is worth that cost.”

Which type of jet ski financing is right for you?

The best way to finance a jet ski is going to be different for different people. Here’s a side by side comparison to help you compare the features of the four jet ski financing options above.

 Average Interest RatesChanging Interest RatesCredit RequirementRisk of Credit Score Damage from High Utilization
Manufacturer LoanInterest rates may start as low as 0% for qualified borrowersRates sometimes start out low and increase over timeGood or better to qualify for the best offersNo
Powersport
Loan
APRs usually lower than personal loansRates are typically fixed over the life of the loanVaries — the higher your score, the better your interest rateNo
Personal
Loan
APRs usually higher than powersport loansRates are typically fixed over the life of the loanSome lenders have options beginning at a minimum credit score of 525 (though you probably won’t get the best interest rates).No
Credit CardsAverage APR is 16.86%Rates may change over timeN/A if your account is already openYes

*Note: The chart above is a helpful guide, but you should always check with individual lenders to compare the specific rates and terms available when shopping for any type of financing.

What to look out for when financing a jet ski

It’s true that owning a jet ski can be a lot of fun. However, you shouldn’t finance any recreational vehicle unless there’s room in your budget to afford it.

Rosenberg recommends that you “never let this type of purchase put you under financial pressure. It isn’t worth the cost if you’ll miss other bills.”

Not sure how much jet ski you can afford? This helpful payment calculator from LendingTree can help you to figure out the answer. LendingTree is MagnifyMoney’s parent company.

The bottom line

Can you afford to purchase your jet ski in cash? If so, you might want to think twice about taking out a loan and paying interest to a lender. (Of course, if you qualify for a 0% or low introductory offer through a manufacturer, you could always take advantage of the low-intro rate and then pay the remaining balance in full when it expires.)

There’s also something to be said for saving your money in order to avoid high interest on a major purchase through your credit card. It might mean putting your purchase off until next year, but the money you could save on interest could be a great trade-off for your wait.

If you prefer to take out a loan so you can enjoy your jet ski now, focus on the interest rates and fees charged by different lenders. We found some of the lowest rates at credit unions and online lenders. Shop around and don’t forget to check with your own bank — many offer discounted rates to existing customers who use autopay. Also, don’t forget that you may be able to make extra payments to wipe out the debt more quickly and potentially lower the amount of interest you’ll have to pay in the long run.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Michelle Black
Michelle Black |

Michelle Black is a writer at MagnifyMoney. You can email Michelle here

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College Students and Recent Grads, Pay Down My Debt

Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Businessman Holding Document At Desk

If you’ve pulled your credit report recently and discovered that there’s been a late payment reported on your student loans, you might be wondering what you can do to recover. Late payments can damage your credit, especially if you stop paying your loans for an extended period of time.

We’ve already gone over the repercussions of delinquency and default, but now let’s take a look at another method of repairing your credit report — sending a goodwill letter to your creditor.

What is a goodwill letter?

A “goodwill letter” is a simple way to repair your credit report, and it can be used for both federal and private loans. The purpose of a goodwill letter is to restore your credit to good standing by having a lender or servicer erase a lateness on your credit report.

Typically, those who have experienced financial hardship due to unexpected circumstances have the most success with goodwill letters. They allow you to ask if your student loan servicer can empathize with the situation that caused the lateness and erase it from your report.

It can also be used when you think the late payment is an error — for example, if you were in deferment or forbearance during the time of the late payment and weren’t required to make any payments, or if you know you’ve never been late on a payment before.

What makes a convincing goodwill letter?

If you’ve been looking for a goodwill letter that will work well, we have some tips on what you should include in your letter:

1. An appreciative tone

It’s important that the entire tone of your letter comes off as thankful and conscientious. If you were actually late on your payments due to extenuating circumstances, taking an angry tone probably won’t help your case.

2. Take responsibility

You want to be convincing and honest. Take responsibility for the late payment, and explain why it happened. They need to sympathize with you. Saying you just forgot isn’t going to win you any points.

3. A good recent payment history

Besides sympathy, you want to gain their trust that you will continue to make payments. If your lender sees payments being made on time before and after the period of financial hardship, it might be more willing to give you a break. When you have a pattern of late payments, on the other hand, it’s more difficult to convince them that you’re taking this seriously.

4. Proof of any errors and relevant documents

If you’re writing about a mistake that occurred, still be friendly in tone, but back up the errors with documentation. You’ll need proof that what you’re saying is true. Unfortunately, errors are often made on credit reports, and it may have been a clerical error on behalf of your servicer. If you have any written correspondence with them, you’ll want to include it.

5. Simple and to the point

The last thing to keep in mind is to craft a short and simple letter. Get straight to the point while telling your story. The people reviewing your letter don’t want to read an essay, and the easier you make their lives, the better.

Sample goodwill letter No. 1

Below is a sample goodwill letter for student loans to give you an idea of how to structure your own:

To whom It may concern:

Thank you for taking the time out of your day to read this letter. I just pulled my credit report, and discovered that a late payment was reported on [date] for my account [loan account number].

During that time, my mother fell terminally ill, and I was the only one left to care for her. As such, I had to leave my job, and my savings went toward her health care expenses. I fell on very rough times after she passed away, and was unable to make my student loan payments.

I realize I made a mistake in falling behind, but up until that point, my payment history with you had been spotless. When I was able to gain employment once again, I quickly resumed paying my student loans, making them a priority.

I’m not proud of this black mark on my record, but it’s the only one I have, and I would be extremely grateful if you could honor this request to remove the lateness from my credit report. It would help me immensely in securing other lines of credit so that I can further improve my credit score.

If the lateness cannot be removed entirely, I would still be appreciative if you could make a goodwill adjustment.

Thank you.

Sample goodwill letter No. 2

If you’re writing a letter because the lateness on your credit report is inaccurate, then try something similar to this:

To whom it may concern:

Thank you for taking the time to read this letter. I recently pulled my credit report and found that [Loan servicer] reported a late payment regarding my account [loan account number].

I am requesting that this late payment be assessed for accuracy.

I believe this reporting is incorrect because [list the supporting facts you have]. I have included the documentation to prove that [I made payments during this time / that my loans were in forbearance/deferment and didn’t require any payments].

Please investigate this matter, and if it is found to be inaccurate, remove the lateness from my credit report.

Thank you.

Make sure you provide as many personal details as possible — without making the letter too long, of course. You should also include your name, address and phone number at the top of the letter in case your loan servicer needs to reach you immediately.

Where to send your goodwill letter

Now that your letter is written, it’s time to send it. This can be done either by fax or by mail. Most student loan servicers have their contact information on their website, but you can also look on your billing statements to see if they specify a different address.

Additionally, you can try calling the credit bureau where the lateness was reported to see if they can give you the contact information you need.

It’s important to mention that goodwill letters are not a means to immediate success. Unfortunately, it often takes several attempts to correspond with servicers and lenders to get them to acknowledge that they received a letter from you.

Your best bet is to get a personal contact at the company who has the power to erase the late payment from your credit report.

If all else fails, try as many different communication methods as possible. Phone, mail, fax, live chat (if your servicer offers it) and email them. Several people who have tried this report that it’s possible to wear your servicer down with a decent amount of requests.

Addresses and fax numbers to try

Here are some addresses and fax numbers for several of the larger servicers, as listed on their websites. Again, it may also be worth phoning your servicer to get the name of someone there that can help you. If you have federal student loans, you can also check this Federal Student Aid page for more contact information.

Nelnet

Documents related to deferment, forbearance, repayment plans or enrollment status changes:

Attn: Enrollment Processing

P.O. Box 82565

Lincoln, NE 68501-2565

Fax: 877-402-5816

Great Lakes

Great Lakes

P.O. Box 7860

Madison, WI 53707-7860

Fax: 800-375-5288

Sallie Mae

Sallie Mae

P.O. Box 3229

Wilmington DE 19804-0229

Fax: 855-756-0011

Navient

For anything other than federal loans, check here

Navient – U.S. Department of Education Loan Servicing

P.O. Box 9635

Wilkes-Barre, PA 18773-9635

Fax: 866-266-0178

Cornerstone

P.O. Box 145122

Salt Lake City, UT

84114-5122

Fax: 801-366-8400

FedLoan

For letters and correspondence

FedLoan Servicing

P.O. Box 69184

Harrisburg, PA 17106-9184

Fax: 717-720-1628

EdFinancial

For FFELP and private loans, check here

Edfinancial Services

P.O. Box 36008

Knoxville, TN 37930-6008

Fax: 800-887-6130

Documents to include with your goodwill letter

Don’t let your efforts go to waste by forgetting to send documentation with your letter. Here’s a quick checklist of what you should include:

  • The account number for your loan
  • Your name, address, phone number and email
  • Statements showing proof that you paid (if you’re disputing a late payment)
  • Documentation showing that you’ve paid on time at all other points aside from when you experienced financial hardship (if that’s the case)
  • Identifying documentation so your servicer knows you sent the request

Also note that if you’re mailing anything, you should send it by certified mail with a receipt requested. This way you’ll know whether your letter made it to the servicer.

What to expect after submitting your goodwill letter

Once you submit your goodwill letter, you should hear back from your creditor with a decision in a few weeks. If two to three weeks have passed without word, follow up via email or phone call.

As you know, there’s no guarantee that your goodwill letter will work. The decision to remove a negative mark from your credit report is entirely in the hands of your creditor.

If your creditor rejects your petition, you’ll have to accept the ding on your credit report and take other steps to boost your credit. But if they agree to repair your credit, you should see the delinquency removed from your report and your credit score increase as a result.

A higher credit score can make life a lot easier, whether you want to take out a loan, open a credit card or, in some cases, even rent an apartment. For student loan borrowers, a strong credit score also opens the door to student loan refinancing, a savvy strategy that lets you restructure your debt, possibly changing your monthly payment and potentially saving money on interest.

If your credit score rebounds and you want to take proactive steps to conquer your student debt, refinancing could be the answer you’ve been looking for, so long as you no longer need the protections that come with federal loans.

Either way, though, make sure to keep up with student loan payments so you don’t end up with a delinquent account dragging down your newly repaired credit score.

Resources

If you’re interested in exploring goodwill letters further — and the results that others have had — check out these websites:

  • Ed.gov: They cover disputes, what to do about them and how to go about rectifying them here.
  • ConsumerFinance.gov: If you have loans with a private lender, and your lender had reported you as late when you weren’t, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) to see if they can help you.
  • myFico Forums: The forums on myFico are populated with helpful individuals that might be able to give you contact information for certain servicers. There are some people reporting success with goodwill letters, and they may be willing to share their letters with others upon request.

It’s worth the time to write a goodwill letter

If you’ve discovered that a late payment has been reported on your credit, and it’s because you fell on hard times or is inaccurate, it’s worth trying to get it erased. These dings on your credit are there to stay for seven to 10 years. That’s a long time, especially if you’re young and hoping to buy a house or a car in the near future. It’s a battle worth fighting.

Get in touch with us on Twitter @Magnify_Money

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
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Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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Best of

The Best Health Savings Accounts in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

So, you need to choose a health savings account (HSA) to go along with your new health insurance plan. There are plenty of options out there, and it’s easy to get overwhelmed. The best savings accounts help you save money with high interest rates and low fees—your HSA should be no different. With a high-yielding HSA, you can cover your out-of-pocket medical expenses and boost your savings at the same time.

We’ve taken the work out of finding the best health savings accounts on the market. Using data from DepositAccounts.com (similar to MagnifyMoney, a LendingTree-owned company) we scoured more than 17,100 nationwide banks and credit unions to find the highest health savings account rates available. To ensure quality and availability, we excluded institutions with a DepositAccounts health rating below a B and credit unions with restrictive membership requirements.

Health savings account deposits at all of the institutions listed below are insured by the FDIC or NCUA.

The 10 best health savings accounts in 2019

Institution
APYMinimum balance to earn APY
Great Lakes Credit Union2.00%$100
Connexus Credit Union
2.00%$15,000
Evansville Teachers FCU1.86%$500
Interior FCU1.61%$25,000
Summit Credit Union1.15%$10,000
First Technology FCU1.00%$0.01
The Adirondack Trust Company1.00%$1
Lake Michigan Credit Union1.00%$5,000
Elements Financial1.00%$10,000
Matadors Community Credit Union0.75%$5,000

Great Lakes Credit Union: 2.00% APY, $100 minimum deposit

Great Lakes Credit Union offers the highest health savings account rate on balances from $100 to $2,000. Balances over $2,000 will still earn interest, but at a slightly lower rate (more comparable to rates lower on this list).

You will need to meet a few requirements in order to earn interest on a GLCU HSA. For one, you need to receive a monthly direct deposit of at least $500. You’ll also need to make at least 15 signature-based debit card purchases totaling at least $150. Finally, you must also enroll in eStatements and be active with GLCU’s online Bill Pay or Mobile Banking features.

The account does not charge a monthly fee.

Great Lakes Credit Union was founded in 1938 and now maintains 11 branches in Illinois; however, you can also take advantage of CO-OP Shared Branches and surcharge-free ATMs. To become a GLCU member, you’ll just need to open a Share Savings Account and fund it with at least $5.

Connexus Credit Union: 2.00% APY, $15,000 minimum deposit

Connexus Credit Union also offers a high health savings account rate, but you’ll need at least $15,000 in your account to earn at that rate. Still, you can earn at decent rates on all other balances larger than $100, with higher balances benefiting best. The account doesn’t require a minimum balance or charge a monthly fee. You can request an HSA debit card when you open your account for use at Connexus ATMs.

You can find Connexus branches and ATMs in Wisconsin, Minnesota, Ohio and New Hampshire. Connexus is also part of the CO-OP Shared Branch network, which gives you access to more than 5,600 Shared Branches and more than 54,000 surcharge-free ATMs through both CO-OP and MoneyPass. To open an account with the credit union, you’ll need to become a Connexus Credit Union member.

Evansville Teachers FCU: 1.86% APY, $500 minimum deposit

Evansville Teachers FCU’s Health Savings Checking account earns at a great interest rate on all balances of $500 and over. Plus, there’s no maintenance fees. You’ll need at least $25 to open the account. You can also benefit from check writing abilities, debit card access and payroll deductions with an ETFCU HSA.

ETFCU also offers five HSA share certificates with term lengths ranging between one to five years. Each require $1,000 to open and earn at competitive interest rates. However, ETFCU doesn’t recommend you use HSA share certificates unless you’ve had an health savings account established for a while, since locking money in share certificates make it much harder to to dip into your funds.

You can find Evansville Teachers Federal Credit Union locations in Indiana and Kentucky. The credit union is also a member of the Alliance One ATM network, which offers fee-free access to about 5,000 ATMs. ETFCU was started by several teachers in Evansville, Ind. in 1936 — but you don’t have to be a teacher to qualify for ETFCU membership, though.

Interior FCU: 1.61% APY, $25,000 minimum deposit

Interior Federal Credit Union’s health savings account earns its great interest rate on balances of $25,000 and over. All other balances earn at lower interest rates, with balances of $5,000 and over benefiting the most. The account doesn’t require a minimum opening deposit, nor does it charge a monthly fee.

The Interior FCU Health Savings Account includes an HSA Visa debit card, which you can use for your medical purchases and at over 55,000 surcharge-free ATMs worldwide, including those at Walgreens, 7/11 and WaWa. Interior FCU has only two branches, one in Washington D.C. and one in Reston, Va. However, you’ll also have access to 5,600 Shared Branches/Service Centers in the country through the CO-OP network.

Interior FCU has been around since 1935. To open an HSA with the credit union, you’ll first need to be a member with a Primary Savings account. You can be eligible for an Interior FCU membership in a number of ways, often depending on your place of employment.

Summit Credit Union: 1.15% APY, $10,000 minimum deposit

You’ll need at least $10,000 in your Summit Credit Union Health Savings Account to earn at the most competitive health savings account rate. All other balances still earn interest, but the lower the balance, the lower the rate. Luckily, there’s no minimum deposit requirement, nor is there a pesky monthly fee. The Summit HSA comes with a free debit card, which you can use at Summit, Cirrus and Nyce ATMs.

Summit Credit Union was founded as CUNA Credit Union in 1935 in Madison, Wis.; you can find the credit unions branches throughout southern Wisconsin. Notably, unlike many credit unions, Summit Credit Union has an open charter, which opens up membership to anyone. You’ll need to open Primary Savings account with $5 to become a member.

First Technology FCU: 1.00% APY, $0.01 minimum deposit

First Technology Federal Credit Union’s HSA Checking account is easy to open and own. In addition to its decent rate, it doesn’t charge setup or monthly service fees on its health savings account, nor are there any minimum balance requirements. You just need at least $0.01 to open the account and to start earning interest. To open this HSA, you can call First Technology FCU at 855-855-8805.

You’ll receive a free HSA debit card with the account, which you can use at over 30,000 CO-OP ATMs. You can also visit over 40 First Tech branches and access more than 5,000 CO-OP Shared Branch locations.

You can qualify for a First Tech membership depending on your employment or residence. First Technology Credit Union was founded in 1952 by members of Hewlett-Packard and Tektronix. You can find First Tech branches, known as Experience Centers, in California, Colorado, Georgia, Idaho, Massachusetts, Oregon, Puerto Rico, Texas and Washington.

The Adirondack Trust Company: 1.00% APY, $1 minimum deposit

To get started with an Adirondack Trust Company Health Savings Account, you’ll only need to deposit $1 — after that, there’s no other minimum balance requirement to earn interest. To access your health savings account, you can take advantage of free unlimited check writing and free ATM access with your ATC HSA Visa debit card. Getting paper statements on this account will cost $4, while using online banking will still cost you $2.

Founded in 1901 in upstate Saratoga Springs, N.Y., ATC maintains 13 branches along the Adirondack Mountains area and offers access to two Amsure branches in Saratoga Springs and Albany, N.Y.

Lake Michigan Credit Union: 1.00% APY, $5,000 minimum deposit

While you’ll only need $5 to open a Lake Michigan Credit Union, you’ll need at least $5,000 in your health savings account to earn at the listed APY; balances below $5,000 will have a much lower rate. The account doesn’t charge a monthly service fee and comes with a free debit card. You can use this debit card to pay for your medical costs and withdraw cash at any LMCU branch. You can also access your LMCU HSA funds through unlimited check writing and online banking.

Founded in 1933, Lake Michigan Credit Union offers open and free membership. As you might expect, you can find LMCU branches in Michigan, but there are also several branches in Florida. Plus, in addition to LMCU ATMs, you can also take advantage of over 55,000 Allpoint ATMs.

Elements Financial: 1.00% APY, $10,000 minimum deposit

You can benefit the most from Elements Financial’s health savings account if you have $10,000 available to set aside for future medical expenses; lower balances (of $100 and over) still earn interest, but at lower rates. The account does charge a $4 monthly fee, but you can avoid it by averaging a daily balance of at least $2,500.

The account includes a free Visa debit card, which you can use for purchases and to access your funds with over 78,000 ATMs worldwide through the Allpoint, CO-OP and Alliance One networks. In addition to these ATMs, you can visit Elements Financial branches and over 5,000 CO-OP Shared Branches in all 50 states and 50 countries.

Elements Financial is a credit union that requires membership before you open an account. Founded in 1930, it currently serves employees from over 135 companies in the U.S. If your company is an Elements partner, you can open a checking or savings account or complete an application for a loan or credit card to start the application process.

Matadors Community Credit Union: 0.75% APY, $5,000 minimum deposit

The health savings account from Matadors Community Credit Union requires a minimum opening deposit of $100, but you’ll need at least $5,000 to earn the highest rate tier on the account — you’ll still earn interest with balances of $100 and over, just at lower rates. There’s also a $3 monthly fee on the account.

In addition to a free MasterMoney Debit Card, you’ll also have use of unlimited check writing abilities to use your HSA money. You can use your debit card to make your medical purchases, and at Matadors Community CU and 30,000 fee-free CO-OP ATMs. You can also visit two Matador branches in Chatsworth and Northridge, Calif. or over 5,000 CO-OP Shared Branches. MCCU offers membership to employees of partner employer groups in the San Fernando, Simi and Santa Clarita Valleys of California.

How to use your HSA wisely

Health savings accounts are used only for medical expenses, and if you shop around you can earn interest on your balances with the right account. But did you know HSAs offer tax benefits, too? You fund an HSA with pre-tax dollars, which lowers your taxable income in the year you make the deposit. As long as you spend HSA funds on approved medical expenses, it doesn’t get taxed. If you do use your HSA funds for something other than approved medical expenses, you may get hit with a 20% tax penalty.

This HSA tax advantage can come in especially handy in retirement. Funding an HSA today reduces your tax burden come tax time. If you wait until retirement to make those withdrawals, you can turn your HSA into a significant retirement contribution. Not only has the balance been earning interest for years, but now you can use that money for medical expenses, which tend to pile up in retirement. Plus, after you reach age 65, you can use your HSA for non-medical expenses without triggering the 20% tax penalty, although the withdrawals are taxed like normal income, similarly to IRA withdrawals. This also applies in the event you become disabled or die.

HSA requirements

You can generally open a health savings account if you’re already covered by a high-deductible health plan (HDHP). This works well since the HSA funds can help you cover the higher out-of-pocket costs that usually come with having an HDHP. To qualify for an HSA, you also can’t have other health coverage, be enrolled in Medicare or be claimed as a dependent on someone else’s tax return.

HSA contribution limits

As set by the IRS, the amount you can contribute to your health savings account will depend on your HDHP coverage, your age, the date you become eligible and the date you stop being eligible. For 2018, if you had self-only HDHP coverage, you can contribute up to $3,450 to your HSA. If you had family HDHP coverage, you can contribute up to $6,900.

For 2019, the contribution limits for self-only HDHP coverage is $3,500 and $7,000 for family HDHP coverage.

For tax year 2018, you can make HSA contributions until April 15, 2019. Even if you weren’t eligible in 2018, you can still make HSA contributions until that date for the months you were eligible. If you have an employer contributing to your HSA, they can do so from Jan. 1, 2019 to April 15, 2019. They just have to notify you and the account trustee that the contributions are allocated for 2018.

HSA vs. FSA

A flexible spending account, or FSA, is another type of supplemental medical spending account. Like a health savings account, FSAs are also funded with pre-tax dollars to use towards qualified medical expenses like prescriptions and copayments. FSAs are employer-sponsored, however, and are usually funded through voluntary salary contributions, but your employer can also contribute. You cannot open an FSA if you’re self-employed. No taxes are deducted from your contribution. For 2018, you cannot contribute more than $2,650 to an FSA.

What further sets FSAs apart from HSAs is that you must use the money in an FSA by Dec. 31 of the contribution year, unless you’re granted a grace period or a $500 carryover option by your employer. A big drawback to FSAs is that if you don’t use the money in the account on time, your employer gets those funds. This is also true if you were to leave the company. To the opposite, the funds in an HSA are yours to keep even if you leave your company.

Health savings account vs. online savings accounts

While health savings accounts help you designate funds toward medical expenses, most HSAs don’t earn at the competitive rates we’ve come to see from online savings accounts. A $10,000 deposit into a health savings earning 2% APY would yield $200 after a year of annual compounding interest. This doesn’t fall too far behind some of the best online savings accounts. A savings account earning 2.45% would yield only $45 more than the HSA after a year.

Still, you’ll find plenty more high-yield options to really boost your savings by looking at online savings accounts, and not just for medical expenses. Plus, you typically don’t have to meet any requirements to open a savings account, like having an HDHP or meeting credit union membership qualifications.

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Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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