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Health Savings Account Plans Individuals Question & Answers

2016 March 23
by Sarah Fields

Mandy asks…

What is the best way to build my credit?

Should I get a cell phone plan or a credit card? Can only do one.

Sarah Fields answers:

1) Obtain and use a credit card wisely
To start building good credit with your credit card, you will need to obtain the card, use it, and make the first payment before you will see any effect on your credit score. You may have to sign up for a “secured card” in the beginning, which means you will be required to deposit money (typically around $300) into an account controlled by the credit card company or bank in order to obtain the card. This deposit “secures” any debt you place on the card. It is a way for a creditor to take less risk when dealing with someone who has poor credit or no credit.

A secured card is just as good as any other credit card when it comes to building credit, for as with any credit card, the payment history on your secure card will be reported to the credit reporting agencies. So by making on-time payments (on-time payments are the No. 1 factor in determining a credit score) and carrying a low debt load (your debt balance-to-credit limit ratio is also a big credit score component), you will be building the history and profile that produces good credit.

Another way to build credit from scratch can include getting a low-limit retail store card or a gas card. Just be sure to pay the monthly balance in full so as to avoid the high monthly interest charges that many of these types of cards carry.

2) Review & understand your credit report
Review your credit report once a year. The higher your credit score, the better. A score below 680 usually results in a borrower being charged a higher interest rate or denied credit. If the report includes items that are inaccurate, request the report be corrected. You can receive a free copy of your credit report at AnnualCreditReport.com and the Federal Trade Commission has a terrific Web site that contains a wealth of information regarding credit reports (including how to address inaccuracies) at FTC.gov.

3) Take a loan
Another good way to build credit history is to pay off a small loan. Borrow from your bank or credit union to purchase a used car or a larger purchase, such as an appliance. Pay the loan on time and in full. Pay any student loans on time every month. (Remember: On-time payments are the No. 1 factor in determining a credit score.)

4) Build job history
A stable job history is another factor that lenders will consider when giving a loan. Creditors look at job history to understand a consumer’s stability and income.

5) Protect yourself from identity theft
Identity theft is at an all-time high, and it can destroy credit ratings. Remember that identity theft occurs both “offline,” and through the Internet. Protect yourself from unscrupulous individuals who could go through your trash, steal account numbers online or get personal information through complex “phishing” scams. Record all important financial information and account numbers in a secure place. Shred all documents that contain personal information. Never give out personal information in e-mails or in a phone call you did not initiate.

6) Create — and stick to — a budget
A good way to maintain a healthy financial lifestyle is to create — and stick to — a household budget. Many people fall into credit score disarray by spending beyond their means, building up debts, and maxing out credit cards. In budgeting, list ongoing monthly expenses (fixed expenses like rent or mortgage payments). Add variable expenses that are “must-buys” (food, gas, medicine). Leave two categories for savings and spending cash (for unexpected expenses and entertainment). Add monthly net income (the amount left after taxes and other paycheck deductions such as health insurance and 401(k) contributions). A free budget guide is available at bills.com.

Good luck as you venture forth into the world of credit, and I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

Thomas asks…

What is the difference between a Health Savings Account and a Health Reimbursement Account?

Sarah Fields answers:

Big differences –

A health savings account (HSA), is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent. HSAs are owned by the individual, which differentiates them from the company-owned Health Reimbursement Arrangement (HRA) that is an alternate tax-deductible source of funds paired with HDHPs. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty.

Health Reimbursement Accounts or Health Reimbursement Arrangements (HRAs) are Internal Revenue Service (IRS)-sanctioned programs that allow an employer to reimburse medical expenses paid by participating employees, thus yielding “tax advantages to offset health care costs”

HRAs are initiated by the employer and serviced by a third-party administrator or plan service provider. The employer may provide in the HRA plan document that a credit balance in an employee’s HRA account can be rolled over from year to year like a savings account. The employer decides if the funds are rolled from year to year and how much rolls over (which can be either a flat amount or a percentage.

According to the IRS, an HRA “must be funded solely by an employer,” and contributions cannot be paid through a voluntary salary reduction agreement (i.e., a cafeteria plan). There is no limit on the employer’s contributions, which are excluded from an employee’s income.

Donald asks…

Which individual health insurance policy do you have?

We are a family of 4. I am at level 2 because of my weight, but all is well with all of our health. I am 32, husband is 29, kids are 3yrs and 8 months. Currently we pay $798.00 a month for top of the line health coverage from Anthem Blue Cross. It is a PPO. We’d REALLY like to get a plan that’s much cheaper, but has both maternity and prescription coverage. We live in VA. What plan do y’all have? Is it good? Is it expensive?

Sarah Fields answers:

You’re dreaming. $798 / month for a top-notch PPO plan with Anthem Blue Cross is spectacular.

But, if you want to save money, then switch to a high-deductible plan combined with a health savings account. Fund the health savings account, and you’ll do better.

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