Retirement Plans

A Debit Card for Dependent Care Savings Accounts?

Most employers will use a debit card to pay a service provider under our Flexible Spending Account (FSA).   We were curious if it is common to offer debit card functionality for dependent care savings accounts as well.   So we set out on a mission to survey the marketplace.   Here are our results ... Are debit cards available for dependent care accounts?

Select vendors that administer FSAs were surveyed and it was found that many do offer debit cards with the dependent care accounts.   When the debit card it swiped, the merchant category code (mcc) is used to determine if the charge is an eligible dependent care charge.

Is it common to offer a debit card with the dependent care account?

The majority of the vendors surveyed said it is not common to offer a debit card with the dependent care account.   This is mainly because there can be swipe issues with it through the automated mcc codes that get transcribed through the system.

Following are some of the issues with a dependent care account debit card:

  • * Dependent care provider does not accept debit cards
  • * Dependent care provide doesn't have mcc code, or has an incorrect mcc code
  • * Dependent care accounts must be funded before money can be taken out of the account (This causes the most noise because the card will be denied, even if the charge is only a penny over the funds available in the account.)

In summary, there is nothing wrong with allowing the aded convenience of a swipe when using your tax-efficient savings account vehicle for health or dependent care.   A company would be wise, however, not to tout the debit card features of DCSA given the low success rate of a successful transaction.