Where FSA Debit Cards May Be Used
Unlike other debit cards, the IRS does not allow FSA debit cards to be used at every merchant that accepts Visa or MasterCard. Rather, only the following types of merchants may accept an FSA debit card, usually enforced using "merchant category codes" or "merchant type codes" assigned by Visa and MasterCard:
- Medical providers such as doctors and hospitals.
- Merchants with an inventory information approval system (IIAS). In an IIAS, a merchant flags "FSA-eligible" items in its point of sale database so they can be separated from all other items by its scanner (brick-and-mortar) or shopping cart (online); it then permits only the "FSA-eligible" items to be charged to the card, with another form of payment required to purchase all other items.
- Until December 31, 2007, all grocers, discounters, and online pharmacies. These merchants must install an IIAS to accept the card after this date.
- Until December 31, 2008, all "true pharmacies" (i.e., those not located inside grocery or discount stores and not online). They must install an IIAS after this date, unless 90% or more of their sales are of FSA-eligible items (prescriptions or over-the-counter items).
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