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May 24th 2020

Your guide to bank accounts in the United States

Wondering what banking options are available for you as a new immigrant in the United States? This article has everything you need to know.

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Louis DeNicola
Personal Finance Writer

Whether you’ve moved to the US for work, school, family, or another reason, opening new financial accounts is one of the first steps in getting your financial footing. A bank account is the core of many people’s personal finances as money flows into and out of your account each week, and you set some aside in a different account for savings.

However, you might need to learn about the different options and how they work. You’ll want to know which type of bank account is best for everyday transactions, and what the different bank accounts are. Some of the common options include:

  • Checking accounts

  • Savings accounts

  • Money market accounts

  • Certificates of deposit

  • Brokerage accounts

  • Individual retirement accounts  

Sahil Vakil, founder of Myra Wealth, says people who move to the US are sometimes thrown off by the names of accounts at first. “Here what you call a certificate of deposit (CD) is called a fixed deposit in India,” he says. “If you look at the structure, you may understand and recognize that it’s the same as a type of account at home.”

Fortunately, there are only a few basic bank account types to learn about. 

What Are The Different Accounts in a Bank?

Checking accounts

A checking account is where many people deposit their pay and keep their day-to-day spending money. Generally, a checking account comes with checks (hence the name) and a debit card, which you can use to spend the money that’s in your account. 

Some checking accounts have a monthly maintenance fee if you don’t meet certain requirements, such as maintaining a minimum balance or having a direct deposit into the account each month. Checking accounts also generally don’t offer a high interest rate on the money you keep in the account, although there are exceptions for online-only accounts and high-yield checking accounts. 

For deposit accounts, the interest you earn will be displayed as an annual percentage yield (APY), which includes compounding (the interest you earn on interest). You can use the APY to calculate how much you could earn in interest each year and compare accounts.

Checking accounts are often the easiest accounts to withdraw money from. Most people use a checking account to pay for regular bills as well as daily expenses. 

Savings accounts

Keeping your savings in a separate account from your day-to-day spending money can help you avoid the temptation to spend the money. Savings accounts offer a higher interest rate than checking accounts generally, and it can be more difficult to spend the money that’s in your account because you won’t receive checks or a debit card that’s directly tied to the savings account. 

You may have to pay a fee if you try to make more than six withdrawals or transfers from your savings account in one month, although there are exceptions for certain types of transactions. 

Money market accounts

Money market accounts (MMAs), sometimes called money market deposit accounts (MMDAs) are like a blend between a checking account and a savings account made for long term savings. MMAs often offer a higher interest rate than a basic checking account or savings accounts, and they have a debit card or checks that make it easier to spend the money. However, as a type of savings account, the six-withdrawal limit also applies to MMAs. 

MMAs also often have a high initial minimum deposit requirement, such as $2,500 to $25,000, and an equally high minimum daily balance requirement if you want to continue earning the high interest rate. 

Certificates of deposit

A certificate of deposit (CD) is a type of savings account that may offer a higher interest rate on your savings in exchange for agreeing to keep the money locked up with the financial institution for a specific period of time. CD’s terms may range from a few months to several years, and they offer a higher rate if you choose a CD with a longer term.

If you need the money in your CD, you may be able to withdraw the funds and pay an early withdrawal penalty or fee. If you think you might need the money in the short-term, a CD might not be a good option. 

Investment and retirement accounts

Banks may also offer you a brokerage account, which you can use to invest your money in stocks, bonds, mutual funds, and other financial products. You also may be able to open certain types of tax-advantaged accounts, such as a traditional individual retirement account (IRA) or Roth IRA, which are generally used to save and invest for retirement.

How Do I Know My Bank Account Type?

If you do online banking, it should be clear when you look up your accounts online what type they are (for example, one will be listed as “savings” and another as “checking”). If you don’t have online banking, you can always ask the teller at the bank, or call the bank’s customer service number.

Why Do Banks Offer Different Kinds of Accounts?

Banks offer different accounts because each person needs different services. Each type of account offers something unique. A checking account is different from a savings account, which is different from a money market account, and so on.

What is the Best Type of Bank Account?

The best type of bank account will depend on the needs you have. Generally speaking, almost everyone starts with a checking and savings account (they often come together when you apply for an account). A checking account is the most flexible and used for day-to-day transactions, but other accounts also have important benefits, which we’ve explained above.

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Credit unions and banks will offer these accounts

In the US, you can open various types of accounts at either banks or credit unions. There’s a lot of overlap between the two, but there are also a few important distinctions. 

“In general, especially if you’re coming to the country as an international student, a credit union that’s on your campus might be the best place to start,” says Vakil. “They may be willing to work with you since you’re associated with the university.” 

Here are the basics about credit unions: 

  • Credit unions are nonprofit organizations that are owned by their members. You’ll need to become a member to open an account at a credit union. 

  • Membership at a credit union could be limited to people who live, work, or worship in the area. Some credit unions are open to almost anyone, but you may need to make a small donation (such as $5 or $10) to a charitable organization along with your application. 

  • Partially because they’re nonprofits, credit unions may offer higher interest rates on deposit accounts and lower interest rates on loans or credit cards than traditional banks. 

  • Technically, credit unions may offer a share draft account and share accounts. In practice, these are equivalent to checking accounts and savings accounts, so don’t let the language catch you off guard.  

And banks:

  • Banks are generally for-profit organizations that have customers rather than members. 

  • Becoming a customer at a bank doesn’t depend on your association with a particular group. 

  • Large banks have branches across the country or around the world, and a bank could be more convenient than a local credit union or smaller community bank if you frequently travel. 

  • Large banks may also offer more advanced technology, such as sleek online accounts and mobile apps, than smaller banks or credit unions. 

“As you get comfortable with the banking system, exploring the higher-interest online accounts might be a good idea,” adds Vakil. Often, banks run the online-only accounts. By saving money that would otherwise be spent on maintaining physical branches, the banks can offer higher interest rates and fewer or lower fees. 

Whether you choose to open an account at a credit union or bank, you’ll often need to make an initial deposit. The minimum deposit amount for a checking or savings account could as low as $5 to $25, but some have higher requirements. 

Another thing to know about credit unions and banks in the US is that the money you keep in your accounts could be insured in case the financial institution fails (i.e., goes bankrupt).

The Federal Deposit Insurance Corporation (FDIC), which is part of the federal government, offers insurance to banks. Up to $250,000 in combined balances and owed interest, per ownership category, is insured for each depositor. 

If you have more than $250,000 in assets you could open accounts with different banks to keep all your savings secure, or you may be able to increase the coverage by adding beneficiaries to your accounts. However, the FDIC doesn’t insure non-deposit accounts, such as investment accounts. Many banks in the US are FDIC-insured banks.

The National Credit Union Administration (NCUA) offers similar insurance on deposits at federally insured credit unions. You can use the NCUA’s website to find an NCUA-insured credit union near you. 

Can you open an account without a Social Security number?

The short answer is yes because there’s no legal requirement for you to have a Social Security number (SSN) to be eligible for a bank account in the US. However, banks and credit unions are required to verify your identity, and some could require an SSN. 

Others allow you to open an account without an SSN if you have an Individual Taxpayer Identification Number (ITIN), and some may accept other forms of identification if you don’t have either an SSN or ITIN.

When you apply, you’ll likely need to share your personal information, such as your name, address, and date of birth. 

You’ll also need official documents to verify the information in your application, such as:

  • A birth certificate, passport, government-issued ID, or an alien identification card. 

  • A lease, utility bill, driver’s license, or identification card to verify your US address. 

The list of accepted documents can vary depending on the bank or credit union, and the Consumer Financial Protection Bureau (CFPB) has a checklist with the commonly required documents. It also lists some of the fees and benefits you should compare before opening a new account.

Recently moved to the U.S.?

Put your foreign credit score to work in the United States

Check if you're eligible to use your foreign credit history to apply for a U.S. credit card.

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