Accounts and bank cards
The simplest and most common service is opening all types of bank accounts and receiving debit cards. Opening an account is the first step to establish relations with a financial institution. Further, such cooperation facilitates the process of obtaining a loan or credit card.
A checking account is the most popular product. Foreign citizens living in the United States can open a bank account in almost any American bank providing only a few documents. An account will be required to pay utility bills, to cover studying expenses including teaching materials, receive or transfer funds, including international transactions. Scholarships and grants for students and salaries for employees are credited to the bank account. You can deposit funds to or withdraw funds from a bank account at any time.
A saving account will allow you to save money, save and receive interest on the amounts on the account. A saving account is a long-term deposit. The withdrawal of money cannot be carried out instantly, as from a checking account.
When opening a checking account, you can order a debit bank card of one of the three largest payment systems: VISA, MasterCard, American Express. The current account will be pegged to this card, with the help of which all financial transactions are performed.
By comparing the rates of several banks, you can choose the most suitable one. In each bank, the fees for opening and maintaining accounts, issuing cards and financial transactions will be different. It is also worth comparing the timing of payments, cash withdrawals, and other indicators. Students can go to their college’s International Student Office and ask if any special conditions are offered to students at different banking institutions.
Despite the fact that now you can open an account even by phone or online, foreigners will have to personally come to the selected bank office and provide the necessary documents:
- valid ID;
- Form I-94;
- Form I-20 for students, DS-2019 for participants in international exchange programs or Form I-797;
- another identification document (birth certificate, state rights, student ID or other);
- confirmation letter from the university for students or from the employer for employees;
- a completed bank application indicating the first name, second name, date of birth, phone numbers and addresses (university, hostel, employer, home);
- W-8 BEN form for students without a Social Security Number and TIN.
A system of cashless payments using checks is very popular. The client can write out a check when buying and selling something or when providing paid services. In turn, the recipient of the check can cash it in.
It works in the following way. The account owner can order a checkbook, which can be used for cashless payments. The checkbook contains the required information: account number, bank code, holder name, and personal information. In fact, a checkbook, like a bank card, is pegged to a specific bank account. When paying for goods or services, the owner of the checkbook fills out the check, signs it and indicates the amount (cost). The recipient contacts the bank where the account is opened and the checkbook is issued. He presents the signed check. The indicated amount is withdrawn from the account and issued to the recipient.
The peculiarity of this system is that very often the bank does not immediately issue the requested amount in cash. It credits it to the recipient’s account and only then cashes it out.
Loans and credit cards
Loans have become one of the most popular services in the USA. It is very convenient to use credit products for various needs due to the simple approval procedure and low-interest rates. But a foreigner will have to spend some time and make some efforts to get his first American loan.
The first thing to do is to have a SSN. A social security number is issued to those who have the right to work in the United States and are required to pay income taxes. The employer will prepare all the documents necessary for receiving a SSN. There is another possibility for students – work on campus or paid internships.
After receiving the SSN, you can contact one or two banks and apply for a credit card. Choosing a bank is based on the offered interest rates and other conditions.
To increase the chances of obtaining a credit card, especially for students and those who first apply to an American bank, you can order a so-called secured credit card. This is a credit card that the client insures with his own deposit. That is, the client pays a certain amount of the insurance deposit. The credit limit will be equal to the amount of this deposit. If suddenly the borrower cannot repay the debt, the deposit will be withdrawn to the debt.
Credit card is the first loan product that a foreigner can count on. In addition, the correct, reasonable and active use of it will help build a good credit history, necessary for applying for greater loans.
Consumer loans and purchases are also popular in the USA. But in most cases, it will be difficult to get them without a good credit history.
Credit history is data on all a person’s credit operations: when and what kind of loan product was issued, when payments were made, whether there were delays, whether debts were repaid, etc. Based on this information, the credit history is characterized as bad, average, good or excellent. It is clear that the better the credit history, the more chances the borrower have to get not only a loan for any purpose but also better conditions for it (for example, a lower interest rate).
Almost any factors affect the credit history: the correct and regular use of credit cards, timely payment, and repayment of loans, lack of debt for utility bills or other payments, how much money is spent and etc. Also, it is important to have other accounts to build a good credit history. All this shows how reliable and solvent the client is.
You can open a secured credit card to build or improve credit history. Despite the fact that the credit limit is insured by the borrower’s own funds, all operations are reflected in the credit history. In addition, banks are more likely to issue a secured credit card to a new client who does not yet have a reliable reputation and a high level of trust.
In credit history, there is such an indicator as a credit score. It implies a solvency rating. It is calculated in points from 300 to 850. The higher the score, the higher the rating of the borrower. It increases or decreases as you use credit cards and other products.
The credit history and credit score are checked, and when checking the credit score is slightly reduced. The more they check it, the lower it falls. This is due to the fact that the client becomes potentially less solvent for possible lenders since payments on a future transaction will fall on his shoulders. But this fact has practically no effect on the real possibility of making these deals (getting a loan, a mortgage, renting a house).
US banks offer several mortgage lending programs. But foreign citizens who do not have resident status – a mortgage, or traditional (conventional) mortgage. In different banks, the traditional mortgage lending program may be called differently. With such a mortgage, the bank gives out only 80% of the value of the house or apartment. 20% – own money of the borrower.
You must have a TIN, social security number, good credit history and high credit score, bank accounts, including deposit accounts, and, of course, official work that brings a stable income to apply to the bank for a mortgage. The better the indicators, the higher the chances of getting a mortgage and even a lower interest rate on it.
The mortgage loan term in the USA is 15 or 30 years. When calculating the interest rate and other conditions, the desired period is taken into account. The shorter the term, the better the conditions, but the greater the monthly payment of the principal debt.
The interest rate on mortgage loans in US banks averages 3.25% – 4% per annum. But in fact, this indicator is calculated separately for each borrower. It depends on credit history, solvency, income level, and other factors.