Yes, HSAs earn interest, but the rate depends on where you keep the money
Most HSAs held at banks earn interest the same way a savings account does. The money sits in an account, the bank pays you a percentage of what you hold, and that interest gets added to your balance. However, the rate varies widely—from nearly nothing at some providers to 4% or 5% at others—and it depends entirely on which bank or financial institution holds your HSA.
The key difference from a regular savings account is that your HSA provider sets the rate, not the market. You do not automatically get the highest rate available. If your employer chose a provider with a low rate, you are stuck with that rate unless you roll the account to a different provider on your own.
Interest accrues on the money you do not spend in a given year. Once you withdraw funds for medical expenses, that money stops earning interest. The longer money sits untouched in your HSA, the more interest it accumulates.
Key Takeaways
- HSA interest rates range from near zero to 4% or 5% depending on the provider, and you earn interest only on the balance you do not withdraw.
- Your employer's choice of HSA provider determines your rate; you cannot shop for a better rate unless you roll your account to a different provider yourself.
- Some HSA providers offer tiered rates that increase as your balance grows, so a larger balance may earn a higher percentage.
- Money in an HSA that is invested in mutual funds or stocks does not earn interest—it earns returns based on market performance instead.
How HSA interest rates are set and what they typically are
Banks that administer HSAs set their own interest rates. There is no federal requirement for a minimum rate, and no HSA provider is required to pay interest at all. Some providers pay almost nothing—0.01% or less—while others pay rates closer to what you would see in a high-yield savings account.
As of 2024, rates vary significantly. Some large HSA administrators pay 0.5% to 1.5%, while others advertise rates of 4% to 5%. The rate you receive depends on which institution your employer selected to manage the plan. If your employer uses a low-rate provider, switching to a better one requires you to initiate a rollover yourself, which takes time and paperwork.
Some providers use tiered rates: you might earn 0.5% on the first $5,000 and 1% on anything above that. Others offer the same rate on all balances. Read your HSA provider's rate schedule to see which structure applies to your account.
The difference between interest and investment returns
Interest is not the only way an HSA can grow. Many providers let you invest your HSA balance in mutual funds, index funds, or other securities. When you invest, you are not earning interest—you are earning (or losing) returns based on how those investments perform in the market.
Investment returns can be much higher than interest, but they also carry risk. A fund that gains 8% in a good year might lose 5% in a bad year. Interest, by contrast, is may provide and stable—you know exactly what you will earn.
Some HSA holders use both strategies: they keep a portion in an interest-bearing account for near-term medical expenses and invest the rest for long-term growth. This approach balances safety with the potential for higher returns over time.
When interest matters and when it does not
Interest on an HSA makes a real difference only if you carry a balance year to year. If you spend most or all of your HSA funds each year on medical expenses, you earn very little interest because the money does not sit in the account long enough to accumulate.
Interest becomes meaningful when you have a large balance that you do not need to touch. Someone with $10,000 in their HSA earning 4% will gain $400 that year. Someone with $2,000 earning 0.5% will gain only $10. The larger your balance and the higher your rate, the more interest matters.
If you are using your HSA primarily as a savings vehicle for retirement medical expenses rather than as a payment account for current bills, the interest rate becomes more important to your long-term strategy.
How to find out what rate your HSA currently earns
Log into your HSA account online or call the customer service number on your HSA card. Your provider should display the current interest rate in your account dashboard or in the account details section. If you cannot find it, ask customer service directly—they can tell you the exact rate and whether it is tiered.
Check your annual statement as well. Most providers list the interest earned during the year, which confirms both the rate and how much you actually received.
If your rate is significantly lower than what other providers offer, you can research rolling your HSA to a different institution. This is called an HSA-to-HSA rollover or trustee-to-trustee transfer. Your new provider will handle most of the paperwork, though the process typically takes one to two weeks.
What happens to interest when you change jobs or leave your HSA
Interest you have already earned stays in your account and belongs to you. If you change jobs and your new employer offers a different HSA provider, you can roll your old HSA (including all interest earned) to the new one or keep it open where it is.
If you withdraw money from your HSA for non-medical expenses after age 65, you pay income tax on the withdrawal but not the 20% penalty. The interest you earned is treated the same way as the principal—it is part of your taxable income for that year.
If you use HSA funds for a non-may have access to expense before age 65, you owe income tax plus a 20% penalty on the amount withdrawn. The interest is included in that calculation.
Comparing HSA providers by interest rate
If your employer allows you to choose from multiple HSA providers, or if you are self-employed and choosing your own, interest rate should be one factor in your decision. However, it should not be the only one. Consider also the fees charged (some providers charge monthly maintenance fees that can eat into interest earnings), the ease of accessing your money, and whether the provider offers investment options.
A provider with a 4% interest rate but $5 monthly fees might actually earn you less than a provider with a 2% rate and no fees, depending on your balance. Do the math for your specific situation before deciding.
Some employers negotiate HSA plans that include higher interest rates as part of the benefit package. If your current provider has a very low rate, it may be worth asking your HR department whether they have considered switching to a provider with better terms.
Frequently Asked Questions
Can I move my HSA to a different bank to get a higher interest rate?
Yes. You can request an HSA-to-HSA rollover (also called a trustee-to-trustee transfer) to move your account to a provider with a better rate. Your new provider handles most of the paperwork. The process takes one to two weeks, and your money continues to be protected during the transfer. You can do this once per year without penalty.
Is HSA interest taxed?
No. Interest earned in an HSA is not taxed as long as the money stays in the account and is eventually used for may have access to medical expenses. If you withdraw money for non-medical expenses, the interest is taxed as ordinary income plus a 20% penalty (before age 65).
What if my HSA provider does not offer interest?
Some providers keep all HSA funds in a non-interest-bearing account by default. You may be able to request that your balance be moved to an interest-bearing account, or you can initiate a rollover to a different provider. Ask your provider's customer service whether an interest-bearing option is available before rolling over.
Does my HSA earn interest while I am not using it?
Yes. Interest accrues on your balance every day, whether you use the account or not. The longer money sits untouched, the more interest it earns. This is one reason HSAs can be useful as long-term savings vehicles for future medical expenses.
How much interest will I actually earn on my HSA?
It depends on your balance and your provider's rate. If you have $5,000 earning 2%, you will earn about $100 per year. If you have $15,000 earning 4%, you will earn about $600 per year. Use your provider's rate and your current balance to calculate your expected earnings.