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Basics of Banking in the U.S.
- 1. Basics of Banking in the U.S.
- 2. Welcome!
- 12. Activity Time!
- 13. Activity Time!
- 14. Activity Time!
- 18. Debit vs. Credit DEBIT CREDIT Requires PIN to be entered Requires signature Can get cash back N/A N/A Possible rewards from Visa/MasterCard Both transactions will be deducted exclusively from your checking account
Editor's Notes
- Welcome participants and provide introduction to presenter(s). Goal: The goal of the workshop is to give you a basic understanding of banking in the U.S. The U.S. banking system is probably a little different than the banking system in your home country. The workshop’s goal is to improve your knowledge in order to help you better manage your finances. During the presentation, f any terms are unfamiliar, please let us know.
- Agenda: This workshop will cover a variety of topics from the advantages of having a bank account to bank scams. We will have an hour to go over these topics. So, let’s get started.
- You may already have a bank account in your home country, or you may not have had to worry about your finances by yourself before coming to the U.S. Either way, having a U.S. bank account will make managing your finances and budgeting a lot easier. Individuals with a bank account use a combination of cash, check writing, debit card, credit cards, and online bill payment to make purchases and pay for bills. A bank account will allow you to securely deposit your financial aid awards, loans, stipends, paychecks, and wired funds from another country. Also, most banks now issue debit cards with a MasterCard or Visa emblem, which means you can use the card to make purchases anywhere that accepts credit cards, including online and in stores. Paying cash or purchasing money orders for payments is sometimes inefficient and can be dangerous if you carry large amounts of cash with you all the time. Also, for important purchases or paying bills, paying in cash doesn't leave much evidence to prove your payment in case of a dispute. For example if you pay rent with cash, there is little way to prove that you paid for rent unless you have a receipt. Unfortunately, there are some dishonest people out there. If you pay by check, credit, or debit card the bank will have a record of your payment.
- People use banks for different purposes. Some need to manage their personal finances and some have extra money to save. Banks help their customers meet those needs by offering a variety of accounts. The two most common accounts for students are: Checking Accounts: Offer safety and convenience. A checking account is the main account that is used to access money that you need for day-to-day expenses. While it’s called a checking account, there are many ways to access money in this account – a check is just one of them. You can use your debit card, or pay bills online. You can also withdraw money at the bank or from an ATM (automatic teller machine) with your PIN (personal identification number). Most banks have a daily transaction and/or withdrawal limit on your account at an ATM. Another nice feature of a checking account is that your bank sends you a monthly record of the transactions or you can access your checking account online or even by phone. Savings Accounts: For students who have a little extra money and want to keep their money in a safe place while earning interest at the same time. The interest rate varies depending on the bank. You can move money from savings into your checking account if needed, although there might be a limit on how many times you can move money between the two accounts. Check with your bank.
- You should look around to find out which banks offer the best services to fit your personal needs at the lowest cost. Most major U.S. banks offer "student accounts" designed specifically for students that usually include a checking account with a debit card, a savings account, free online bill payment, and other features. Check with each bank for details. Associated Cost Many banks won’t charge a fee to open an account as long as you deposit a minimum amount and keep a minimum balance. Some banks charge a monthly fee if your account falls below a certain amount. Other banks may charge fees for additional services such overdraft protection. Check with banks for details.
- As an international student, plan to open your account in person at a local bank. You can call the bank beforehand to make an appointment or banks usually will assist you if you just visit a local office. You can also talk to representatives from some local banks during International welcome week. When you go, make sure you bring your social security card, passport, and the funds you want to deposit. In addition, you should bring as many of the following documents as you have - although every bank has slightly different requirements. You will likely need at least one of the following in addition to your passport: Your school id, Your state driver’s license or id, or your visa. Some banks might not require a social security number to open an account, but can use another form of I.D. such as ITIN – Individual Taxpayer Identification Number, check with each bank. Under federal regulations, the ITIN may be accepted by banks as a legitimate identifier for prospective customers without a social security number. Typically, banks prefer social security numbers. The reason banks need to officially verify the identity of a prospective customer is because they have a legal duty to prevent money laundering and fraud. They also must file 1099 tax forms with the IRS, disclosing any interest they have paid to their customers. A U.S. Treasury Department regulation states that banks may accept ITINs instead of social security numbers.
- Check Protection Banking laws help protect you in the event someone steals your checks and forges your name. If a check is lost or stolen, you also may be able to stop payment on the check if you act quickly before the check “clears” and if you meet any other rules set by the bank. Contact the bank immediately if a check is lost or stolen.
- Your checkbook comes with a check register, which is used to record all of the transactions that affect your checking account. This will help you determine how much money you have in your account, even if the transaction has not processed through your bank account yet. Be sure to record the check or transaction in your checkbook register as it occurs.
- Let participants complete activity. See appendix for activity handout. Go over completed activity. See appendix for completed activity handout.
- Let participants complete activity. See appendix for activity handout. Go over completed activity. See appendix for completed activity handout.
- Let participants complete activity. See appendix for activity handout. Go over completed activity. See appendix for completed activity handout.
- Overdraft: An overdraft of your checking account can happen when you write a personal check, withdraw money from an ATM, or make a purchase or payment with a debit card when there isn't enough money in your account to cover the charge. In this situation, the account is said to be " overdrawn ". Most banks will cover the amount that was overdrawn for a fee between $20 and $30, but each time you complete a transaction with insufficient funds you'll be charged another fee. Be very careful because overdraft fees can add up quickly and you must pay the fees in addition to putting enough cash in your account to pay for the ATM withdrawal, check or card purchase.
- Some banks offer overdraft protection plans. This is essentially a line of credit or a link to your saving account to cover overdrafts. Banks may also charge for this service, but overdraft protection plans are typically less costly than standard overdraft fees for some individuals. In the past, some banks automatically enrolled you in their standard overdraft practices for all types of transactions when you opened an account. Under the new rules, your bank must first get your permission to apply its standard overdraft practices to everyday debit card and ATM transactions before you can be charged overdraft fees. The new rules do not cover checks or automatic bill payments that you may have set up for paying bills such as your mortgage, rent, or utilities. To grant this permission, you will need to contact your bank. Remember, if you don't opt in, your debit card could be declined if you're out of money. You can decide to opt in or opt out of your banks overdraft practices whenever you want.
- *Although it can be inconvenient, refusing to accept an old checks is done for the depositor's protection. Banks may worry about funds still being available for an old dated check and in turn wish to protect their customers from any fees or liability for insufficient funds.
- If you are using a check card at a store, you will often see the choice of debit or credit when using your check card to pay for a purchase. What’s the difference? A "debit” purchase will allow the total amount of the purchase as well as any cash back to be posted to your checking account immediately and requires your PIN to be entered. A "credit" purchase will allow only the total amount of the purchase to be posted to your checking account and requires a signature. The amount will still be deducted from your checking account, and you will not be charged interest or accrue debt. Additionally, you may earn rewards by choosing the “credit” button depending on the card processor (Visa or MasterCard). In either case, both "debit" and "credit" transactions will be deducted exclusively from your checking account. Most of the time, it is a personal preference on which on is used.
- Internet banking is a great way to manage finances online through your bank’s website. The biggest advantage of using internet banking is accessing your bank accounts online 24 hours a day, 7 days a week. Here are just some of the ways online banking can make banking easier for you:
- If you lose your check card, checks, or notice any unauthorized transactions, contact your bank as soon as possible. Many banks have toll-free numbers and 24-hour service to deal with such emergencies. On the back of your debit card, there is usually a telephone number to call. So it might be helpful to make a photocopy of the back of your card. The longer you wait, the more money you might be responsible for if an unauthorized person uses your card to buy things.
- The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails. An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.
- Identity theft occurs when someone assumes your identity to perform a fraud or other criminal act. Criminals can get the information they need to assume your identity from a variety of sources, including by stealing your wallet, going through your trash, or by accessing your credit or bank information. They may approach you in person, by telephone, or on the internet and ask you for the information. Identity theft is one of the fastest growing crimes in America. A dishonest person who has your social security number can use it to get other personal information about you. Identity thieves can use your number and your good credit to apply for more credit in your name. Then, they use the credit cards and do not pay the bills. You may not find out that someone is using your number until you are turned down for credit or you begin to get calls from unknown creditors demanding payment for items you never bought.