Opening a bank account is one of the first priorities for any international student arriving in the United States.
Most Americans don't carry a lot of cash for security reasons. Instead, they pay by check, debit card or credit card - even for small purchases. While you are studying in the United States, you'll need to open at least a checking account at an US banking institution.
Following are the basic banking services in the United States:
A checking account is the most important banking service you'll have in this country. It allows you to pay your bills, entertainment and living costs with US currency, without having to carry around a lot of cash. It also prevents you from having to send cash in the mail, which is very risky.
There are many different checking accounts available. Some banks charge per transaction. Others have a basic monthly fee. Many offer free services if you maintain a certain minimum balance in your checking account. The minimum balance is typically between $500 - $2,500. Some checking accounts even pay interest on your account balance, however, the interest rate is relatively low. You may be better off putting your long-term savings in a money market, for instance.
Opening an Account
To open a checking account, you will need to go to a banking institution. They will ask you for your Social Security Number - or an IRS Form W-8. You can get a Form W-8 at a bank or from the US Embassy or Consulate when you apply for a student visa.
You must deposit money into the account when you open it. If you deposit a check drawn on a foreign bank, the money won't be available to you until the US bank receives funds from the foreign bank. It may take several weeks before the money is credited to your account.
Your best options are to deposit money by traveler's checks or to arrange for a wire transfer from your home bank. If you deposit a traveler's check, the bank will treat the amount as cash. Just be sure to bring checks denominated in US funds. You can purchase traveler's checks from travel agencies, American Express offices and banks for typically a one-percent commission on the amount. If you arrange a wire transfer from your home bank, it will cost about $35. Keep in mind that it may take several days for that wire transfer money to clear the new bank.
Writing a Check
From your new checking account, you can withdraw money using a check or a debit card. You will receive a set of checks with your name and address printed on the top. To write a check, the amount of the check is written twice, once using numerals and once using words.
Avoiding "Bounced" Checks
It's very important that you keep excellent records, so you know how much you have spent. To help you keep track; your bank will send you a monthly statement with cancelled checks. These are checks that you have written and for which a certain amount has been deducted from your account.
You are only allowed to spend the amount of money in your bank account at a particular moment. If you write a check for more than the amount in your account, you will "bounce" that check. "Bouncing" a check means that the check will be returned to you and not paid by your bank. It also means you will be billed additional charges by your bank.
At some banks, you can apply for a line of credit on your account that will provide overdraft protection. Keep in mind there is a fee for this service, and that the money to cover your account is considered by your bank to be a "short-term" loan. Your best bet is to keep excellent records of your banking transactions.
Cashing a Check
To cash a check after endorsing it (signing your name on the back), you will need to show up to two pieces of personal identification. Typically these might include a driver's license and credit card. Checks are not accepted everywhere. For instance, many retailers or businesses will not take an out-of-state check. You also won't be able to use a check to place a phone order, rent a car, buy a dinner or purchase an airline ticket. For those services, you will need a debit card or a credit card.
Debit Cards (or ATM Cards)
Most checking accounts provide you with a debit card, also known as ATM cards. This card allows you to withdraw cash and deposit funds into your account from an Automatic Teller Machine (ATM) seven days a week, 24-hours a day. There are ATMs throughout the country, near shopping centers, outside banks, even at gas stations. Your own bank will probably have ATMs scattered around your community.
Use your own bank's ATM as often as possible. If you withdrawal cash from another ATM, both your bank and the bank owning that particular ATM may charge you a fee. Deposits should be made only at your bank's ATM.
Some banks offer a debit card that functions as an ATM card and a credit card. You can use it as you would a credit card at restaurants, shops, rental car companies and many other locations. This is very convenient, because many of these services will not allow you to pay by check. Or if they do allow checks, they will require you to show at least one form of photo identification.
Debit Cards versus Credit Cards
There is a big difference between a credit card and debit card. When you use a credit card, you are billed for the amount and you have a grace period of about 20-25 days to pay the amount before interest is charged. When you use a debit card, however, the money comes directly from your checking account, so you won't have a finance charge. In other words, a debit card is just like writing a check, because you will be overdrawn if you spend more than what you have in your account. So keep track of your ATM receipts and deduct the amounts right away from your balance.
If you lose your ATM card, report it to the bank immediately. You have 48 hours to report a stolen card and you will owe a maximum of $50. Wait longer and you may owe up to $500. If you wait longer than 60 days, you may lose all the money in your account.
A savings account allows you to save money and earn interest on your savings. You can use your ATM card to withdraw money from your savings account, but you can't write checks from this money. Your interest is paid on a monthly or quarterly basis.
& Credit Ratings
Credit cards have several benefits. Just like a debit card, a credit card allows you to make purchases, rent a car or make travel arrangements - situations where a check wouldn't be appropriate. They also are good to have around in case of an emergency.
However, credit cards are a big financial responsibility too. Unlike a debit card - where the money is removed immediately from your checking account - with a credit card you have a month to pay your balance. Otherwise, you will incur an interest charge monthly until that amount is paid off. Over time, that balance will grow substantially if you aren't careful.
Your Credit History
To apply for a credit card, you will have to go through a credit check. The bank will review your credit history to determine whether you are a good financial risk. A credit report includes:
Your personal and employment information
Payment history (how well you have paid your bills in the past)
Other debt that you have
Bankruptcies, lawsuits and inquiries into your credit history
Are you curious about your credit history? You can contact one of the following companies to check your record for a small fee:
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
Credit Information Services
P.O. Box 740241
Atlanta, GA 30374-0241
Trans Union Corporation
National Disclosure Center
P.O. Box 105873
Springfield, PA 19064
International Students and Credit
Unfortunately, it can be hard for international students to get a credit card in the United States. Most don't have an established credit history in this country. Many companies worry that international students will return to their homes without paying off their debt.
For those situations, remember that you can use your debit card as a credit card in most situations. Just keep in mind that your debit card purchase will be immediately deducted from your checking account. Also, many banks offer Buxx cards. These are prepaid and reloadable credit cards that allow a certain amount of money to be spent on purchases. These are accepted at all the same locations as a regular credit card.
If you have a major credit card in another country, you should bring it with you. This allows a bank in this country to check your credit limit on a foreign card. It may make them more likely to issue you a card. Otherwise, explore whether your new US bank offers credit cards. It may agree to provide you with a credit card, because you have money on deposit at their bank.
Maintaining Good Credit
To build a good credit history in this nation, always pay your bills on time. Late payments will reflect negatively on your record.
Keep your credit card amounts low. In fact, experts recommend you spend less than 10 percent of your monthly income on paying credit card debt. Avoid large impulse buys, especially if you can't afford to pay the entire amount. Pay off all your debt or at least pay more than your minimum balance each month, so you'll pay less interest. And use cash advances for emergency situations only. These advances typically have higher interest rates than other purchases.