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A guide to first timers in the US part II
Unlike India, the credit card is not a status symbol in the US but a necessity for all your financial transactions. Here’s how you go about getting this all-important card.
Once you have got your social security number, the next obvious step is to open a bank account and get a credit card. A credit card is an absolute must for living in the US and your social security number will be required every step of the way.
If you had used a credit card in India, then you know how it works. In India, we treat credit cards as a luxury and many of us have a mental block against owning one. Spending goes up is the normal objection. However, in the US you simply cannot do without one.
However, getting a credit card in the US is not as easy as it is in India, especially for a new entrant. In the US, credit cards are issued based on a person's credit history. Needless to say, somebody new to the US does not have a credit history. That doesn’t mean you cannot get a credit card. But, just that it will take time to establish your credit worthiness. So, how does one go about doing that?
One way out is to get a secured credit card. A secured credit card is like a debit card. You have to deposit X amount of dollars and the bank issues a card with the maximum credit limit of $X. These cards do not have the same acceptability as a Master or a Visa or an American Express (Amex) card. But, it gets you through in most cases and more importantly helps in building up your credit history. So the sooner you start this process, the better.
A few employers I know have arrangements with credit card companies. If you are employed with one of them, getting a credit card will become a lot easier.
Here are some useful links that could help:
www.creditchoice.com
www.ramresearch.com
www.cardtrak.com
Links to credit card issuers.
www.creditcardmenu.com
www.ablecredit.com
www.futurecard.com
www.capitalone.com
www.owenart.com
www.creditnow.net
www.nextcard.com
Opening a bank account
The real challenge before opening an account is not the process itself but choosing which type of account one needs. All of us in India are used to the simple ‘savings account’. However, in USA you have varied choice and it would do well if you can study the merits and demerits of each before opening the account. Checking with your colleagues who have been living in the US is a great way of doing it. But make your own decision.
Approach a bank close to your office or home and they will guide you through the process. For most of the banks, the process of opening an account is quite simple and it may not even take 15 minutes. You will also be issued an ATM card almost instantly.
Choices of accounts normally available are checking account, savings account, money market account, certificate of deposits etc. The specific options for each of these accounts vary from bank to bank.
Checking account: It is very similar to the current account operations in India. On the plus side, it allows you to write an unlimited number of checks and would be serviced 24 hours by phone (automated account information at the least). Debit cards are normally issued against these accounts. The usefulness of this card has been explained in the credit card section. Use of ATMs is normally through this card. Banks may charge fees on checking accounts and charge for any checks you order. The charge (depending on the bank) could be:
A maintenance fee
A flat monthly fee
Monthly fee if the minimum balance in your account drops below a certain amount any day during the month or if the average balance for the month drops below the specified amount.
Some may charge an additional fee for specific transactions, for example each check you write or for each withdrawal you make at an ATM. Although a checking account that pays interest may appear more attractive than one that does not, look at the fees for both types of accounts. Checking accounts that pay interest may charge higher fees than the regular checking accounts, so you could end up paying more in fees than you earn in interest.
Savings account: With savings account you can make a number of withdrawals, but there is a limitation to the number of transactions you can make. As with other accounts, institutions may assess various fees on savings accounts, such as minimum balance fees. The rate of interest earned on your savings varies between 2.5 per cent and 3.5 per cent.
In most banks, when you open a checking account you will automatically have two accounts, a savings account and a checking account with the same account number. Keeping a right balance between the accounts will enable you to meet expenses while earning interest on your savings.
Money market deposit account: Most banks offer an interest-bearing account that allows you to write checks. This is called a money market deposit account (MMDA). An MMDA usually pays a higher rate of interest than a checking or a savings account. However, most often it requires a higher minimum balance to start earning interest. But they frequently pay higher rates for higher balances. Withdrawing funds from an MMDA may not be as convenient as from a checking account. The limitation on transactions is higher. Check with the bank before you finally decide on these accounts.
Certificate of deposits: These are very similar to the fixed deposits in India.
In addition to the charges levied by the bank and the interests you get, here are some more questions to ask before you make a decision:
Does the bank have an ATM where you can deposit and withdraw money? Is it open all the time? Is it close to either your place of work or residence?
Is the bank accessible from your home/office? If you are someone who likes to bank in person only, this may be important.
Does the bank have a 1-800 (toll free) phone number where you can check account information 24 hours a day? This would be important if you are trying to check information outside your region.
Does the bank have a national presence or is it a local bank? Local banks may give better service. However, national banks have a large network and would be accessible when you travel.
Check out how much they charge for ATM use.
Remember, unlike in India, banks charge for checkbook facility. So, until you have settled down, it may be prudent to order the minimum number of check leaves.
Finally, open your account in a bank that is a member of the Federal Deposit Insurance Corporation. This means your deposits are insured and protected for up to $100,000. Banks and financial institutions display their Member FDIC sticker. So look for it.
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