Opening a US bank account can be a little tricky for expats who don’t have a Social Security Number, but it’s not impossible.
If you know what you’re doing and what banks need from you, it can be one the easiest parts of setting up life in the US.
OPENING A US BANK ACCOUNT
There’s no law stating that “non-resident aliens” can’t open a US bank account, however banks and financial institutions may deny their applications for other reasons.
The USA Patriot Act, brought into affect after the September 11 terrorist attacks on New York’s World Trade Center, puts more onus on financial institutions to collect personal information from its customers.
This is why they will ask for a US address to tie your checking, savings or credit accounts to. You will also be asked to provide your Social Security Number, but if you don’t have one there are ways around that rule.
START BEFORE YOU MOVE
The easiest way to get your first US bank account up and running is to open an account with a US-based multinational financial institution that has branches in your home country.
The earlier you open it the better because they’ll have more of your financial history to draw from when you arrive in the States.
Some of these banks also offer free transfers between your accounts in the two countries.
Atlas Wealth Management provides financial advice to Australian expats. Its Managing Director Brett Evans suggests you go into your Australian branch to chat about your move and opening a new US account before you leave, as some US branches aren’t as clued-in.
“This can be the case if you have an Australian Citibank account though our experience shows that not all US Citibank branches are aware of this and clients have experienced problems in the past which usually need to be escalated and are then resolved,” Mr Evans said.
“HSBC in the past also provided this convenience but we have noticed in the last year or two that they have been operated more on a solo basis with very little benefit of account portability between jurisdictions.”
HOW TO CHOOSE A US BANK
If you haven’t had the time to open an account at home, there are plenty of US banks and financial institutions that will take your business.
Do your research before you choose the financial institution to open your US account with. You’ll most likely need a checking and savings account to start with but be warned, interest rates are so minute here that they’re almost non-existent.
Mr Evans recommends sitting down to think about what you’ll need from your financial institution before committing to one.
“We normally recommend clients deal with the larger institutions if there is the need to access their accounts in other states (due to travel inside of the US) as well as the ability to conduct national and international transactions,” he said.
“With the rise in popularity of currency exchange brokers, the requirement of being able to conduct online international fund transfers with your bank isn’t as important anymore because more often than not you can get a far cheaper exchange rate with a currency broker than your bank.”
He said the only exception ATLAS has seen is for money transfers between US and Australian Citibank accounts, which offers “quite competitive rates”. Although he still recommends checking with a third party provider before committing to a transfer.
“The other problem that we have seen with clients working with the smaller banks is that when they have travelled overseas quite often the smaller US banks will restrict or remove access to funds, whereas the larger banks are well structured to handle these types of transactions.”
Do Your Research
What should you look for in a financial institution before opening a US bank account with them? The easiest way to compare accounts is to use comparison websites such as NerdWallet.
- The fee structure: Some charge fees for transferring money between accounts more than the set limit, monthly account keeping fees, and a host of others.
- Online portal/Mobile banking: The US banking system seems to be stuck back in the early 90s. Maybe even the 80s. Some financial institutions don’t offer these options.
- Bill pay: Some banks, such as Wells Fargo, allow you to pay bills through your online account. But be warned that not all banks have this facility.
- Person-to-Person money transfers: Forget about it. For the most part they don’t happen here. Which brings me to my next point.
- Cheques: Or checks as they’re called here. You’ll be writing them for bills, rent, or just to pay people back for things. Find an institution that doesn’t charge you a fortune to print check books.
- Credit Union v. Bank: Don’t discount credit unions when you’re doing your research. If you’re worried about ATM fees, some offer free transactions at certain other banks’ ATMs.
Checking and Savings Accounts: What’s the Difference?
The two most common US bank accounts that you’ll open when you arrive are checking and savings accounts. They’re pretty self-explanatory, but it doesn’t hurt to know exactly what they’re traditionally created and used for.
A checking account is the one you’ll work out of for daily transactions. It’s the account that money will be withdrawn from when you make debit purchases in person or online. It is also the account that any checks (cheques) you write will come out of.
It’s important to check whether there are minimum monthly balances required or service fees attached to this account.
A savings account basically does what it says on the box – it’s where you put the money you don’t want to spend. You’ll want to compare interest rates because, frankly, they are pitiful in the US so you’ll want to get the best rate possible.
Some will also require minimum balances and service fees so keep a weather eye out for that.
Types of US Financial Institutions
While many financial institutions portray themselves as a one-stop shop, there are some that offer specialised services depending on your needs.
Savings banks were originally established as a place for lower-income workers to save their money. There are many online-only versions that provide higher interest rates than are available in traditional bricks-and-mortar financial institutions.
While Savings and Loans associations tend to specialise in building up savings and granting mortgages and other loans.
Credit Unions are not-for-profit organisations that have a restricted membership. The parameters mean that only a specific person can join and those restrictions could extend to where you live, work or which union you’re a member of.
WHAT YOU’LL NEED
Financial institutions are legally required to collect personal information from you to verify your identity before opening a US bank account. The easiest way for them to do that is to get your social security number (instructions on getting your SSN).
If you haven’t been issued one yet, or your visa doesn’t allow one, you need to show two other forms of photo-identification instead. One of them must be your passport.
- Driver’s license issued in that state
- Proof of employment
You may be asked for your current and past addresses, past employment details and date of birth. The bank will photocopy your identification to keep in its records.
Other forms of ID include:
- An overseas debit card
- Work Visa
- Student ID
You’ll also need to bring:
- A copy of your I-94
- Your visa (if it is in an expired passport)
- Document confirming your address (a bill or rental agreement)
Some financial institutions require you to deposit a minimum amount stipulated by them, into a savings account that you open.
The amount will differ according to the institution and sometimes the account in question. You may be asked to provide “proof of funds” to show that you have the required amount to deposit.
A recent bank statement should suffice.
GETTING A CREDIT CARD
Credit cards can be much more difficult to be approved for in the US, mostly because you likely don’t have a credit history in the country to back you up.
But that shouldn’t stop you from trying altogether. A credit card is an important part of building your credit history and the quicker you do it, the better for you.
So if it’s going to be more difficult, how do you go about it?
What is a Secured Credit Card?
No doubt you know the drill – you need a credit card to build your credit history, but without one, it’s almost impossible to do.
There is a way to get a credit card though and it’s relatively pain free, you just have to keep an eye on your spending for the first six months or so.
Secured credit cards are issued to people with little or no credit history or those with bad credit.
Secured credit cards generally work by getting a cash deposit from you and then using that as collateral in case you don’t pay your bill.
If you place a $500 deposit on your secured credit card, your “credit” limit is equal to $500. To be clear, that money is held by the issuer so that if you don’t pay your bill somewhere down the line, they can use your deposit to cover themselves. That money does not automatically go towards covering your purchases.
Once you’ve built up trust with the issuer, you’ll get your deposit back and if your credit rating is good enough later on they’ll offer you an unsecured credit card.
What is an Unsecured Credit Card?
If the secured credit card system doesn’t seem right for you, try unsecured credit cards instead.
You’ll usually be approved for a low limit (between $200 and $500) but you won’t need to put down a deposit.
An unsecured credit card basically works like a normal one. Be warned that since they pose a greater risk to financial institutions, they also tend to have the highest rates and fees associated with them.
Use Your Secured & Unsecured Credit Card Sparingly
Now that you’re trying to build up a good credit score and history, don’t go crazy with your new credit card.
There are a few rules you should follow to ensure you don’t ruin your chances straight out of the gates:
- Use it sparingly
- Try to spend less than 30% of the limit each month
- Pay it back in full before the due date
Unsecured Credit Card Perks
When you’re choosing your credit cards, be they secured or unsecured, remember to look out for the perks that are offered.
Some will offer you a percentage of cash back on what you spend during your first year, others will entice customers with free shipping on online purchases from certain stores.
Or you can opt into monthly or quarterly benefits. For example, Discover offers 2% cashback on petrol (gas) and restaurant purchases during the first quarter of the year.
If you’re driving a lot or have a long commute, that could end up being beneficial for you.
US BANK ACCOUNTS MADE EASY
That’s the Bright Lights of America guide to opening your first US bank account and credit card.
Do you have any experiences to share that will make it easier for others to get through the process unscathed?
Have I missed something important that needs to be included in this guide?
That’s what the comments section is for! Please let us know so that we can build the best easy-to-follow guides for new expats moving to the US.