Moving to the United States can be exciting for an international citizen but also challenging, especially in understanding its financial system.
Knowing the ins and outs of the US banking system will give you the edge on how to navigate and set yourself up for financial stability and success. It may be a bit complicated at first, but after reading this article, you’ll find your footing and establish yourself financially in the US. Let’s dive into everything you need to know.
An Overview of the US Financial System
In a nutshell, the US financial system is an expansive network that involves various financial institutions and regulatory bodies. Here is a simplified breakdown to give you a good idea:
Primary Components
Banks: These are the primary financial institutions where they’ll handle your money. They also offer services such as savings and checking accounts, credit cards, and loans.
Credit Unions: They are similar to banks. The difference is that they’re member-owned and often offer better rates and lower transaction fees.
Fintechs: They partner with sponsor banks to enable access to products like checking accounts, savings accounts and credit cards. Typically, fintechs don’t have physical branch access but offer user-friendly, modern apps.
Federal and State Regulatory Bodies: These comprise three main Federal and State Regulatory bodies.
Federal Reserve: This is known as the central bank of the USA. They are responsible for overseeing the many monetary policies and regulating banks.
Federal Deposit Insurance Corporation (FDIC): This government agency offers deposit insurance in case of bank failure. Your money is protected, up to $250,000 per account, in case a bank goes bankrupt.
Securities and Exchange Commission (SEC): Responsible for regulating the securities market to protect investors and maintain orderly and fair markets.
Main Differences From Other Countries
What sets the US apart is that they have a unique set of financial regulations that can be different from other countries. One good example is the emphasis on gaining a good credit score is higher in the US, as it allows you to access better interest rates, better loan rates, and credit card deals.
Important Banking Laws and Regulations You Must Know
If you’re an Indian student or worker who plans to move to the USA and you plan on opening a checking account, you must first make sure that the bank is FDIC-covered so that in the event of failure or bankruptcy, your money is protected.
Not only that, you should also be aware of these banking regulations so you can properly navigate the country’s financial system.
Truth in Lending Act (TILA)
The TILA basically protects you against inaccurate and unfair credit card, loan, and billing activities. This regulation requires lenders to be transparent when it comes to the cost of credit. When you apply for a loan or credit card, TILA ensures you get a clear picture of the terms, like the annual percentage rate, total interest, and any other fees.
Gramm-Leach-Bliley Act (GLBA)
The GBLA is the federal law that protects your personal information. For example, when you open a bank account or apply for a loan, the financial institution requires you to share your sensitive and personal information which they will collect. This policy is mandated so that these institutions must tell you how they will protect and use your data.
They must also explain to you that you have the right to "opt out" if you don't want your information shared with other third-party institutions.
Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Act was established to prevent any consumers from unfair and illegal products and practices. This was enacted to prevent a repeat of the 2008 US financial crisis from happening again. This act was established to oversee and enforce consumer protection laws and prevent firms too large and risky which could threaten the global economy.
Consumer Financial Protection Bureau (CFPB)
The CFPB’s mandate is to ensure that financial institutions protect and treat all consumers fairly. If you are experiencing issues with a financial product, like being charged unexpected and hidden fees on your credit card, the CFPB will assist you in resolving your problem. Moreover, they also provide resources and educational media to help you make informed decisions.
Opening a Bank Account
Opening a bank account in the US is an important way to manage your finances, whether you’re a student, a worker, or planning a long-term stay. Here’s a helpful guide to help you through the process:
Types of Bank Accounts
Checking Accounts
These are accounts designed for your everyday transactions, such as paying bills, writing checks, and making debit card transactions. These transactions often come with fees, but it can be waived with direct deposits or simply maintaining a minimum balance.
Savings AccountsAs the name suggests, this account is ideal for storing your money and earning interest. These often have higher interest rates compared to checking accounts, but they may have limits on the number of transactions you can make per month.
Certificates of Deposit (CDs)These are fixed-term savings accounts with a higher interest rate. CDs are recommended if you’re saving money that you won’t need to access for a scheduled period of time.
Required Documentations
Proof of Identification: Valid passport, approved visa, or driver’s license.
Proof of Address: Utility bills, lease agreements, statement of accounts, or other documents showing your current US address.
Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN): If you don’t have an SSN, you can apply for an ITIN. However, you can still open an account without an SSN with the help of some fintech organizations.
How to Open a Bank Account
Choose the Right Bank
Research banks and credit unions to find one that offers the needed services and features. You can consider factors like fees, branch locations, and online banking options. Not only that, fintech companies such as Adro can assist you in creating a US bank account in the comfort of your home, even before you’ve arrived in the US. This type of service can help you get settled financially from the moment you arrive in the country.
Visit a Branch or Apply OnlineMany banks allow you to open an account online or using their official app, but you can also visit a branch in person. Provide all the necessary documentation and fill out the application form. Ask assistance from employees if you have any questions while applying.
Initial DepositSome banks require an initial deposit to open the account. This can vary from $25 to $100 or more, it all depends on you. You can make this deposit in cash, by check, or through a transfer from another bank account.
Set Up Online BankingOnce your account is open, set up online banking to easily manage your finances, pay bills, and monitor your financial transactions. Most banks offer mobile apps for easy access to your account and do your banking anytime and anywhere you want.
Now that you have an idea of how to navigate the US financial system, you can move to the US and start your financial journey with confidence. Understanding everything can be quite overwhelming at the start, but the longer you stay, the more you get used to it, allowing you to make smart decisions about your finances.
This is a partnered post with Adro.