Banks and credit unions in the U.S. offer many financial services and options. While they both offer similar services, a credit union is a non-profit organization that requires membership, while a bank simply offers accounts and loans to the general public. Credit union membership might be based on a community tie, an employer or a school, and offer lower fees and pay higher interest rates on savings accounts. However, credit unions generally have fewer branches and might offer fewer services.
Checking accounts are the most widely used financial institution service. A checking account allows you to pay for items with a bank-issued check or debit card representing the money you have deposited in your bank account. This way you do not have to carry large amounts of cash, and can also help you keep track of your balance and spending habits.
Once you open an account, you deposit (put in) money in your account at the bank, and can use either checks or your debit card to draw on that money. Both you and the bank keep track of how much money you add and take out of the account every month.
When you need to pay someone or a retailer, you can write them a check by filling in all the information (payee, amount, and signature)—or pay with your bank-issued debit card (accepted like a credit card at most stores and online).
Writing a check when you know you don’t have the money to back it in your checking account, (called Non-sufficient Funds or NSF) is considered a crime. The bank will either return the check unpaid, or temporarily cover the amount for you and charge an “overdraft fee.” If the bank returns the check to a business, that business will likely add an additional charge called a “service charge.” In addition you may face other charges or fines for breaking the law.
Savings accounts allow you to earn interest on your money when you leave it in the bank. Banks usually require a certain amount to open a savings account, but the idea with this type of account is to build up or save money, and not to withdraw from it frequently. You can earn interest on that money while the bank “holds” it for you.
Banks and credit unions all charge varying fees for different services, including interest rates and requirements for opening accounts. For example, in order for you to avoid certain fees or charges, some banks require you to have a “minimum balance” in your checking account. If your balance drops below the minimum balance, the bank will charge you a fee. Ask an American friend or the foreign student advisor at your school to help you find the best bank to meet your needs.
Is My Money Safe In a Bank?
Most major banks and credit unions are federally insured for accounts holding up to $250,000. That means that if anything should happen to that institution, the United States’ federal government would cover your losses up to that amount.
Credit cards are similar to checks in that they allow you to purchase items without cash. They offer more convenience than checks because you can use them almost anywhere you travel (many businesses will not accept out-of-town or out-of-state checks) and because you do not need to keep a record of the balance since you receive a monthly bill showing all your credit card purchases.
However, credit cards have fees associated with them. Some credit card companies charge an annual fee for their credit cards, and you also pay an annual interest rate on any balance you leave on the card for more than a one-month cycle. That means
that a credit card can be charged for purchases you don’t actually have the money to pay for, and then when the monthly bill comes, if you cannot pay it off, you will pay interest on the charges, making what you purchased even more expensive.
Unlike a credit card, a debit card charges your bank account immediately and draws directly from the money in your account. The benefit of using a debit card is that you can’t charge against money you don’t have. Most banks offer a debit card as you open a bank account. However, only about 60% of credit unions offer debit cards.
Automatic teller machines (ATM) or “cash” machines allow you to perform a variety of banking functions without having to go to the actual bank. You can get cash, make deposits, transfer money between accounts, and sometimes even pay bills. These machines, often found in bank lobbies or parking lots, in grocery and convenience stores, and in shopping malls, usually operate 24 hours a day. You must have a bank-issued debit or check card and password to use these machines.
Many banks in the U.S. offer money exchange, taking your currency and replacing it with U.S. dollars. You can also find this service at airports. U.S. coins include the copper-colored penny (one cent), the silver nickel (five cents), the silver, smaller dime (ten cents), and the silver, larger quarter (twenty-five cents). Less common, but still used are also the silver half-dollar coin (fifty cents) and the gold one-dollar (100 cents) coin. Paper bills, all colored a dull green, come in these denominations (values): $1, $5, $10, $20, $50, and $100. You may occasionally see a $2 bill as well. Most people generally use $20 bills or less, and some businesses will not accept bills larger than $20 because they would run out of bills to make change.
While in some cultures, asking a friend, acquaintance or even family member for a loan is socially acceptable and even expected, it is not recommended in the U.S. If you need a large sum of money to make a purchase, consider applying for a loan at your bank, but don’t expect to get that kind of money from an individual. Even if you fully intend to pay it back, these kinds of financial situations can put a strain on a relationship. The same holds true when you need someone to co-sign on a car or house loan. In the U.S. asking someone to make a commitment to covering large amounts of money if you should be unable to keep your financial obligation creates an awkwardness that Americans do not generally want to mix with personal relationships. Asking for $5 to cover lunch might not cause a problem, depending on your friendship, but it becomes a different scenario when your request becomes a financial burden they do not want responsibility for.