Banking system in the USA can be quite different and difficult to understand for international students in the USA. However, it is imperative to understand the system to open the right type of bank account and accessing financial services can make day-to-day life easier and help prepare for the future and have a better grasp and easier time when managing finances, paying for services and living expenses, and even building a financial history.
Banking is a large topic so this blog will be the first of four blogs. This first one will be focused on the different types of accounts and the necessary basics to understand the system while the second one will be focused on the credit system (cards and score), third one will focus on advanced knowledge and some recomendations and the final one will be about tips and tricks to make the most out of your cards, accounts and money.
Before we jump right into the topic of this blog, I want to clarify some important notes:
- I’m not a financial expert or affiliated to any bank or credit union. All of this information was obtained through experience (as an international myself, currently a 4th year) and thorough investigation.
- All this info has been updated to October 2024; information can change any time so please confirm that all facts are still applicable at the time you read this blog.
- Finally, all economic decisions, investments, etc. are your responsibility, so please don’t follow my opinion (specially during the tips section) blindly and without confirming any variable that might apply to your specific case (nationality, tax information, visa status, etc.).
So, let’s start from the beginning. You go to a bank and want to get an account. Which one should you choose, and what do you need to open it?
Let’s start discussing the different types of bank accounts a student can have access too:
- Checking Account: This is the most common type of account for everyday banking and normally the first one to get. International students typically open a checking account to receive their stipend and handle routine expenses such as rent, tuition, groceries, and other daily necessities. These accounts usually come with a debit card that can be used for ATM withdrawals, online payments, and purchases at stores. It is important to notice that some checking accounts may have maintenance fees or minimum balance requirements, though most banks offer student accounts with no fees or maintenance costs.
- Savings Account: A savings account allows students to deposit money they don't need for daily expenses, and it earns interest on the balance. While withdrawals from savings accounts are usually limited, these accounts provide a safe place to store funds for future needs. Some banks may require a minimum deposit to open a savings account. Particularly, offer a significantly higher interest rate. These accounts can be found at both traditional and online banks. They are an excellent option for international students looking to earn more on their savings, particularly if they have money they don’t need to access frequently. However, students should check for any requirements or fees that may apply to maintaining the account. We'll talk more about this type of account on the third part of this blog.
- Credit Card: Credit cards are crucial for building a credit history in the U.S., which is essential for future financial activities like renting an apartment, applying for loans, or even some job applications. While international students may have difficulty getting a traditional credit card without a Social Security Number (SSN) or credit history. The entire second part of this blog series is going to focus on this type of cards and we'll go deep in detail about them.
International students usually need to provide specific documents when opening a bank account, such as:
- Passport: A valid passport is required for identification.
- Visa: The student visa (F-1, J-1, etc.) is used to confirm the student's immigration status.
- I-20 or DS-2019: These forms are issued by the student's school and serve as proof of enrollment in a U.S. educational institution.
- Proof of U.S. Address: Students may need to provide proof of their local address through a utility bill, lease agreement, or university housing letter.
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN): While not always mandatory for opening basic accounts, an SSN or ITIN is often required for earning interest on savings accounts or applying for credit cards. Some banks allow students to open accounts without these, though having one can make the process easier.
As we can see with the types of accounts and the documents required to open an account, there is a clear before and after having a SSN. Therefore, before obtaining a SSN and entering the credit world (part 2 of this blog) we only need to focus on opening a checking account for stipend payments and general use. Having the type of account selected and the requirements to open such an account, we can focus on the bank. There are three different types of banks:
- Traditional Banks: Well-known banks such as Chase, Bank of America, and Wells Fargo are popular for their wide branch networks, online services, and international banking capabilities. They often offer accounts designed for students, with fewer fees or minimum balance requirements.
- Credit Unions: These nonprofit institutions often provide better interest rates and lower fees than traditional banks. Some universities have partnerships with credit unions, which may offer student-focused services. However, in most cases, credit unions are exclusive to a specific sector (army, navy, worker federations, etc.).
- Online Banks: Banks like Ally Bank, Discover Bank, or Chime offer high-interest savings accounts and checking accounts with fewer fees. These banks are ideal for students who prefer online and mobile banking and don’t need access to a physical branch. However, they may lack certain services, such as in-person banking, access to ATMs (few available or requiring a fee) or quick cash deposits.
When choosing a bank, I recommend taking these factors in consideration:
- Look for Student Accounts/no fee account: Many banks offer accounts specifically for students, which may have no fees or lower minimum balance requirements. No yearly or maintenance fees should be the number one requirement when opening a checking or savings account, especially if it’s your first account.
- ATM Accessibility: Choose a bank with ATMs located near your campus or apartment to avoid paying out-of-network ATM fees.
- International Wire Transfers: If you plan to send or receive money from home, find a bank with reasonable fees for international transfers.
- Customer Support: opt for banks with excellent customer service, and if necessary, consider whether they offer multilingual support.
I hope this blog has given you some insight and some guidelines about banking and some understanding about the basics and requirements for international students in terms of banking in the U.S. As I mentioned at the beginning of this blog, this will be a series of blogs where we will go deeper and discuss more advanced topics in the next parts of these series.
About the author:
Manuel Carmona Pichardo is from Pachuca Hidalgo, Mexico and is a current Ph.D. student in Chemistry. He got his B.S. in Chemistry at Universidad Autónoma del Estado de Hidalgo in 2016 and his MSc in Chemistry from Cologne University in Cologne Germany. Read more.
Further Reading:
Banking in the USA for international students Part 2: Credit cards and score
Banking in the USA for international students Part 3: Dos and don’ts with accounts
Banking in the USA for international students Part 4: How to play the game