Common Forms of Payment in the U.S.
Cash – is not as popular in the U.S. as credit/debit cards. Many people in the U.S. find it more convenient to carry credit/debit cards. One can argue that using credit/debit cards can be too convenient, such that one spends more than they would if they had cash. On the other hand, cash can be lost, stolen, or misplaced, which is not a usual problem with credit/debit cards, as you can work with credit card companies to replace cards, report them stolen, etc.
Personal Check – Checks are common but again, not as common as credit/debit cards. Checks are a form of paper payment that is used in place of cash. They are useful when you don’t have enough cash with you or the person/business you want to pay cannot take a credit/debit card. You may not have any need for a check now, but it could come in handy in the future when making any payment by mail (often to government agencies, when required). Don’t ever mail cash to anyone!
Writing your first check can be intimidating; however, your checkbook will have a guide similar to the one below, if you have any questions about writing a check, just ask a counselor (or someone around you).
Credit & Debit Cards – These are the most common form of payment. Oftentimes you can use a credit/debit card from your home country, but there will most likely be some “foreign transaction” fees added to your bill. Make sure you check the rules for using your credit/debit card in the U.S. in advance!
Getting a credit card in the US can also help you build a credit history, which is useful for doing things like buying large items like a car, etc. See below for more details on debit and credit cards.
There are various big banks for you to choose, just to name a few: Wells Fargo, US Bank, Bank of America, Chase, Discover, etc. However, for the convenience, there are the three main banks located in Northfield for you to consider:
In addition, Transferwise is another great option for a “border-less” bank account with a Mastercard that gives you flexibility for banking in multiple currencies. You can also deposit your St. Olaf work award money. This would be a suitable option for exchange students who do not wish to open a US bank account for a short period of time.
There are also two ATM machines on-campus. One ATM is Wells Fargo and the other is First National Bank of Northfield (both located in Buntrock Commons). Both ATMs can be used to take out cash, but not to deposit cash to your bank account. Therefore, you may have to physically come to the bank locations to make deposits.
Common Types of Bank Accounts
Checking Account – This is the type of account you need if you want to write checks from a checkbook or if you plan to withdraw money often. Debit cards are often attached to a checking account (but can also be attached to a savings account). Sometimes banks will charge a fee for having a checking account; however, will allow you to have it for free if you keep a certain amount of money in it at all times. Make sure to clarify with the bank representative about any fees you might need to pay when opening an account.
Savings Account – This is the type of account you need if you just want to keep your money safe and don’t plan to use it much. The benefit of a savings account is that you can earn a -very- small amount of interest each year.
It is important to note that if someone else knows your debit/credit card information, they can easily use it to purchase things online or in a store. Please do not share your credit card or bank information with others and check your online banking account monthly for any charges that are not yours. There are also many SCAMS out there through social networks, emails, etc. asking for your bank account information. Sometimes someone pretending to be from the IRS might even call and ask for your Social Security Number (SSN). If you see any suspicious activity on your accounts, PLEASE CALL THE BANK IMMEDIATELY. If you get any strange phone calls or emails, especially if they ask you for passwords or SSN/credit card numbers, please check with Megan or any counselors for advice BEFORE proceeding.
Credit Cards vs. Debit Cards
A Debit Card is linked directly to your bank account – usually your checking account. When you use a debit card, the money will be taken directly out of your bank account. It is important to make sure you have enough money in your bank account (by checking your online banking account) when you use a debit card, because if there isn’t enough money, you may get charged an extra fee called “Overdraft fee.” The overdraft fee, as the name suggests, is a fee put onto your account if you purchase something without having money in your account. Usually, the bank will not allow you to purchase things when you do not have money in your account; however, in certain places (like a gas station) it does allow you to overspend the money in your account and puts an overdraft fee on your account (usually $35). It’s easy to get charged with the overdraft fee when you have monthly subscriptions such as magazines, entertainment services (such as Spotify, Apple Music, Netflix, Hulu, etc.), Apple iCloud Storage, Car insurance, etc. Such subscriptions are paid automatically, even if you do not have money in your account. REMIND YOURSELF TO CHECK THOSE ACCOUNTS TO AVOID OVERDRAFT FEES!
A Credit Card is usually attached to a credit card company (not your bank), however, Wells Fargo offers great credit cards for students. When you use a credit card, it is NOT automatically taken out of your bank account. One of the benefits of credit cards is that when you get your bill, you can choose how much of the bill you want to pay. So if you owe the credit card company $100, but you only have $50, you can pay $50 now, and the rest later. However, if you do not pay all the money you owe each month, you will be charged an interest fee on top of what you still owe. So while credit cards can be convenient when you want to pay for a large purchase over time, it can also be costly when not paid in full right away.
Some credit cards offer incentives like points or cashback; however, be careful as these cards usually have an annual fee and other hidden costs. While these deals may be tempting, make sure that you learn about all fees associated with the card.
Credit cards are also a great way to build your “credit history”. Credit history is a good thing to have if you plan to make any large purchases or loans, buy a phone with a phone plan, or if you want to apply for another credit card in the future. If you think you might want to do these things in the future, it might be a good idea to consider opening a credit card account so you can start building your financial history. What is important about this, however, is ensuring that you pay your entire credit card bill every month. If you leave a balance or are late to pay your bill, this can have a negative effect on your credit history, which might lead to you having a bad credit history, and one could argue that no credit history is better than a bad one. More on credit scores and credit history on this website.
Applying for credit cards is difficult for international students in the U.S. Most credit card companies require you to be a U.S. citizen or permanent resident, or to have some sort of credit history already. You also have to have a Social Security Number (SSN) in order to apply. There are some banks that might offer you a secured credit card, but unlike a regular credit card, you pay the limit of the credit card before opening the card. For example, if you were to open a secured credit card with a limit of $500, you will be asked to pay $500 before opening the card, and then -just like a credit card- you will be required to pay back the credit card’s credit by the end of each month. The Secured Card, like credit cards, have annual fees, late fees, and interest rate, so make sure to research those. Some international students said they have been able to successfully apply for the Discover Student Card. Another credit card that international students have seen success with is Self Score. Regardless of which credit card you choose, make sure to read the fine print and fully understand what fees are associated with the card before giving them any of your information.
This article has a few more details on credit cards in the U.S.: http://www.investopedia.com/articles/personal-finance/121214/top-credit-cards-international-students.asp
And check out this video which explains some dos and don’ts with a credit card: