For immigrants new to the U.S. financial system, choosing the right bank account is an important first step in managing your money and building credit. But with the many options out there from checking and savings accounts to money market and certificate of deposit (CD) accounts, how do you know which is best for your everyday spending and transactions?
This comprehensive guide examines the pros and cons of various bank accounts to determine which type of bank account is best for everyday transactions. Whether you prefer an in-person bank or online-only account, you’ll learn how to open an account as an immigrant and effectively use all the banking tools to safely manage your finances. Read on to gain the knowledge you need to start banking like an American!
What is a Bank Account?
A bank account is a service provided by banks and credit unions that gives you a secure place to store your money. It’s an alternative to keeping all your funds as physical cash. Your money is still accessible but it also earns interest over time and has protections against theft or loss.
With a bank account, you can deposit funds to increase your account balance. You can withdraw money as needed at ATMs, write checks, use a debit card for purchases, set up direct deposit of your paycheck, and pay bills online. Your account activities and balance are tracked via monthly statements.
There are several different types of bank accounts to suit specific needs:
Checking Account – For everyday transactions like shopping, bill payments, ATM withdrawals
Savings Account – For building longer-term savings and earning interest
Money Market Account – For higher interest savings while maintaining some transaction abilities
Certificate of Deposit (CD) – For earning fixed interest rates over set periods of time
The right account for you depends on how you intend to use it. Next we’ll compare the features of these common bank accounts to determine which may work best for daily purchases and expenses.
What are Common Types of Bank Accounts
Checking Account
A checking account allows you to seamlessly pay for everyday expenses like groceries, transit, and utilities bills. Checks were traditionally used for these transactions but today debit cards and online payments are more common.
Checking accounts offer easy access to your funds without withdrawal limits. You can use the ATM, write a check, make online bill pay or with your debit card, or transfer money digitally. Direct deposit allows your employer to send your paycheck right to your account. You can set up automatic bill payments too.
Most checking accounts pay little to no interest. And they may charge monthly maintenance fees unless you maintain a minimum balance or minimum direct deposits. Still, the unlimited transactions make checking accounts ideal for active daily spending.
Savings Account
As the name suggests, savings accounts provide a place to safely build long-term savings and earn interest over time. The banks pay interest monthly or quarterly based on your average account balance.
Unlike checking accounts, savings accounts limit the number of withdrawals you can make monthly, usually to six. This restriction aims to discourage accessing the funds frequently. But it allows time for the interest to accrue. ATM withdrawals and purchases aren’t usually permitted, only transfers to other accounts.
Look for a savings account with no or a low monthly service fee. Some charge maintenance fees if your balance dips below the required minimum. While savings accounts typically don’t suit everyday spending due to limits, the interest makes them ideal for growing savings.
Money Market Account
A money market deposit account (MMA) combines features of both traditional savings and checking accounts. Like savings accounts, MMAs earn interest based on your balance. But their rates are typically higher than standard savings accounts to offset their higher minimum balance requirement.
MMAs also limit monthly withdrawals like savings accounts, often to just six per month. But they may provide check-writing and debit card abilities for times you need access to your funds, much like a checking account. However, most don’t offer features of traditional savings accounts like direct deposit and bill pay.
MMAs are a good choice if you want to have money market accounts that earn higher interest without sacrificing access. But their transaction abilities aren’t as robust as checking accounts.
Certificates of Deposit
Certificates of deposit (CDs) are time-bound savings accounts that earn higher interest rates but require locking up your money for a set period. Common terms range from 3 months to 5 years. The longer the term, the higher the interest rate.
When you open a CD, you agree to leave your deposit for the full term. If you make any withdrawals before maturity, you’ll incur significant penalties. This lack of liquidity is exchanged for earning a guaranteed, fixed interest rate over the term unaffected by market fluctuations.
CDs suit funds you know you won’t need access to anytime soon and want to grow through interest. But their restrictions don’t make them ideal everyday spending accounts.
Choosing an Account for Daily Use
When determining the best bank account for transactions like paying bills, shopping, and withdrawing cash, the top priority is easy access to your money. Checking accounts excel here with no withdrawal limits, debit card access, and robust digital payment options.
Checking accounts let you seamlessly pay bills online, shop with your debit card, withdraw cash at ATMs, deposit checks remotely, and send/receive money electronically. Direct deposit and automatic payments further simplify managing common expenses. This versatility makes checking accounts advantageous for everyday spending.
Both savings accounts and CDs discourage frequent withdrawals, so they pose challenges for active daily spending. MMAs offer more flexibility than standard savings with debit card abilities. But their transaction limitations still make checking accounts better suited for everyday, unlimited use.
Consider monthly maintenance fees as well when choosing your primary account. While checking accounts may charge monthly maintenance fees, many waive them if you maintain a minimum balance or direct deposits. Opt for a checking account with no monthly fees when possible.
For managing common spending and transactions, a checking account offers the best combination of easy access, convenience through technology, and fee minimization.
Brick and Mortar vs. Online Banks
Traditional brick and mortar banks operate physical branches you can visit in-person for assistance. Online banks instead conduct all business digitally through websites and apps without any physical locations. Both offer standard checking and savings accounts.
Here are some key differences to consider:
Brick and Mortar Banks
Pros:
- Personal customer service at branches
- Face-to-face support for complex issues
- Ability to deposit/withdraw cash
Cons:
- More limited hours than online banks
- Fewer fee-free ATMs typically than online banks
- May charge higher monthly fees on accounts
Online Banks
Pros:
- Higher interest rates on savings typically
- More fee-free ATM networks
- Accounts have lower or no monthly maintenance fee
- Added convenience through apps
Cons:
- No in-person branch assistance
- Fewer account options beyond basics
- Communicating issues can be difficult
Online banks are generally most cost-effective with higher interest earnings and low or no fees. But the in-person support at traditional banks can provide added peace of mind for some consumers. Consider your comfort level managing accounts digitally when choosing between brick or mortar and online institutions.
FDIC Insurance for Bank Accounts
An important consideration when opening a bank account as an immigrant is ensuring your money is protected. Banks and credit unions that are members of the Federal Deposit Insurance Corporation (FDIC) provide account insurance up to $250,000 per depositor.
The FDIC automatically insures checking, savings, money market, and CD accounts at FDIC member institutions. This means if the bank fails for any reason, you will recover your funds up to $250,000. Joint accounts are insured separately up to $250,000 per co-owner.
You do not have to sign up or pay for FDIC insurance – it is provided automatically when you open an eligible account at a participating financial institution here. The FDIC insures over 5,000 banks and savings institutions. To confirm any bank is FDIC-insured, look for the FDIC logo or search the bank name on the FDIC website.
The National Credit Union Administration (NCUA) offers equivalent insurance coverage up to $250,000 for credit union accounts through the National Credit Union Share Insurance Fund (NCUSIF).
So as long as you open your bank account at an FDIC or NCUA member institution, your funds are insured up to $250,000 in the rare case of bank failure. This coverage provides peace of mind that your money is safe. Be sure to research any bank you consider to confirm they offer federal account insurance.
Opening a Bank Account as an Immigrant
To open a bank account in the U.S. as an immigrant, you must provide:
- Government-issued ID like a driver’s license or passport
- Social Security number or Individual Taxpayer Identification Number (ITIN)
- Proof of address through a utility bill, signed lease, etc.
If you are a non-citizen without a SSN, many banks offer ITIN accounts that let you provide an ITIN instead. Ask banks about their ITIN account offerings before applying.
Some additional tips for opening an account as an immigrant:
- Ask if the bank accepts MATRICULA or other foreign IDs
- Look for banks that service large immigrant communities
- See if they have multilingual bankers on staff
- Ask friends/family for immigrant-friendly bank recommendations
By finding a bank that frequently serves immigrants, you can likely avoid headaches and simplify opening an account. Do your research to ensure it’s an immigrant-friendly bank.
Managing Your Account
Once your account is open, take advantage of all the convenient features for everyday use:
Online/Mobile Banking – Monitor balances, make transfers and deposits, pay bills all through your bank’s website or app.
ATM Card – Access cash, make deposits, check balances, make debit card transactions and transfer between accounts at ATMs. But watch for fees at non-network ATMs.
Direct Deposit – Setup recurring payroll or benefits deposits directly into your account versus using checks.
Automatic Payments – Schedule recurring payments of bills directly from your account on their due dates.
While bank accounts provide significant conveniences, also take precautions:
- Avoid overdrafts by tracking your balance closely and spending less than your available balance.
- Link accounts to overdraft protection by connecting to savings or line of credit.
- Use fraud alerts and review statements regularly to catch unauthorized charges.
- Report lost/stolen cards and errors immediately to limit liability.
- Monitor your credit reports frequently for signs of identity theft.
- Only use secure networks for online banking and avoid public wifi to deter fraud.
By leveraging all your account has to offer along with practicing caution, banking can simplify your daily money management as an immigrant.
Researching Bank Accounts Online
With hundreds of banks and credit unions in the U.S., finding the right checking or savings account that fits your needs can feel overwhelming. Thankfully, there are various websites that do the research for you and provide useful details on available accounts.
Websites likeNerdWallet, Bankrate, and WalletHub allow you to easily compare checking and savings accounts across multiple financial institutions. You can filter based on factors like:
- Minimum balance requirements
- Monthly maintenance fees
- Interest rates
- ATM access
- Digital experience rankings
These sites also outline critical account features and terms on their pages for each specific bank or credit union. You can see information like:
- Monthly fees and how to waive them
- Interest rates on checking and savings accounts
- Size of ATM fee reimbursement
- Availability of overdraft protection
- Direct deposit capabilities
- Mobile app ratings and reviews
In addition to NerdWallet, Bankrate, and WalletHub, sites like Magnify Money also publish updated rankings of top bank accounts and posts reviewing new account offerings.
Leveraging these online resources allows you to identify the ideal checking or savings account for your needs based on in-depth data like fees, rates, and features. The account research has already been compiled for you on these websites.
Before opening a bank or open a checking account though, spend time browsing a couple of comparison sites to get a sense of your options. Look for the accounts with ideal characteristics for your banking habits.
Checking Accounts Are Your First Choice for Everyday Transactions
With the right checking account, banking like an American and taking control of your finances can be smooth sailing!
