Understanding Money Matters
Earning, spending, and saving money can get complicated. In the U.S., the banking network can be difficult to navigate. Credit cards are a common means of exchange but getting credit can be a challenge for immigrants. Taxes - and all the necessary forms - are another hurdle for newcomers. This section provides much of the basic information you will need to manage your money.
Taxes are money paid by U.S. citizens and residents to federal, state, and local governments. Taxes pay for services provided by the government, such as roads, schools and the military. There are different types of taxes, such as income tax, sales tax, and property tax.
Income tax. Income tax is paid to federal, most state, and some local governments and is based on taxable income from wages, self-employment, tips, and the sale of property. Most people pay income taxes by having money withheld from their paycheck. Non-citizens living and working in the United States are expected to file income tax returns every year, no matter what their immigration status is. Even undocumented persons who are working "under the table" are expected to file, and may be able to get an "Individual Taxpayer Identification Number' (ITIN) from the IRS (apply on IRS form W-7) in order to file the income tax return.
Social Security and Medicare taxes. These federal taxes are taken out of your paycheck. Social Security provides benefits for certain retired workers and their families, certain disabled workers and their families, and certain family members of deceased workers. Medicare taxes pay for medical services for most people over age 65.
Sales taxes. Sales taxes are state and local taxes. These taxes are added to the cost of buying certain things and are based on the cost of the item. Sales taxes help pay for services provided by state and local government, such as roads, police, and firemen.
A W-2 is a federal form that lists your earnings and the taxes you paid for the last tax year. A tax year is from January 1 to December 31 of each year. By law, each employer must send you a W-2 form by January 31 each year.
The IRS deadline for filing taxes is April 15 of each year. There are some organizations that provide free tax preparation, including the Campaign for Working Families.
Visit the U.S. Citizenship and Immigration Services website for information on taxes and your responsibilities.
Banks offer many services including checking and savings accounts, foreign currency conversion, bank drafts, money orders, credit cards, loans, inter-bank transfers, travelers checks, safe-deposit boxes for storing valuables, and investment services.
Other bank services include debit cards which allow you to withdraw or deposit money in your bank account using automated teller machines (ATMs). Your money is protected if you put it in a bank that is a member of the Federal Deposit Insurance Corporation (FDIC). The FDIC provides banks with insurance to protect your money. If your bank closes permanently, the FDIC will pay you the amount of the money in your account up to $100,000.
Choosing a Bank
While you may not need many of these services, most people have either a checking account (for paying bills) or savings account (for earning interest on your money). You can open an account for yourself or a joint account with your spouse or another person.
Banks may charge you fees for some of their services. Some offer free services if you keep a minimum balance in your account. Banks compete with each other for your business and it is often worth comparing services and costs, such as monthly fees, charges for deposits and withdrawals, or ATM charges. Interest is paid on savings accounts and this can vary with the bank as well. If you are opening a savings account, make sure to compare interest rates.
Credit unions and savings and loan associations are other choices for banking. Your employer may have a credit union that you can join or there may be a credit union that serves the geographic area where you live. Credit unions provide most of the same services as banks, but many offer extra services at lower costs.
In the Philadelphia area there are a number of banks, each of which has many branches. So, in addition to comparing prices and services, you may also want to make sure there is a branch close to your home or office. You may even want to visit a branch to see if you can get a general feeling of how friendly and helpful the staff might be.
For a partial list of banks in the Philadelphia area, see here, or look in the yellow pages of a phone book under banking.
Opening a Bank Account
When you go to the bank to open an account, you will need identification including an unexpired passport, your I-94 card, your I-20, DS-2019, or I-797 approval notice, a W-8 BEN form if you are a student not eligible for a SSN or ITIN, and any secondary form of identification you may have. Most banks will also require a street address rather than a post office box.
When you open a checking account, you will be given temporary checks. Permanent checks may take a week or two and there is a charge for them that is deducted from your account. It is important to track your balance. If you write a check and there is not enough money in your account, the check will be returned to your bank and most banks charge fees for returned checks that can be as high as $25 or $35 dollars. The company or business that you write a check to might also charge you a fee if your check bounces.
There are several ways to send money from the United States to someone in another country: cash transfers, money orders, bank transfers, or sending a check. It is never advisable to send money through regular mail, because of stricter security measures since Sept. 11, and because of the possibility it can get lost or stolen.
Western Union can send money worldwide, and has the ability to transfer money online or by phone and the recipient should be able to pick up the funds within the hour (depending on the hours of operation at the receiving station). Proper identification will be required. MoneyGram is another company that provides international money transfers.
Money Orders: U.S. Postal Service & Banks
Most banks as well as the United States Postal Service issue international money orders. The maximum allowed is $700 per money order. However, you can purchase multiple money orders per day, up to a maximum of $10,000. The processing fee ranges from $3 to $8.50 per money order. U.S. Money Orders can be cashed in banks, all U.S. post offices, as well as post offices in most countries around the world. Visit the U.S. Postal Service website for more information.
If you have a bank account, there are several ways to transfer money overseas through the banking system. Not all banks operate in the same way, however, so it is important for you to check with your local bank for details, including fees.
When transferring money from your bank account in the United States to another bank account overseas, you need to have your account number, your ABA (routing) number, the address of your bank here and the address of the bank where you are sending the money. Such transfers can take several days to clear and can be costly.
Banks can also draw up bank drafts, which can take a little more time than wire transfers, but do not cost as much. The money is taken out of your account and a bank draft is prepared. You will send it to the recipient who then deposits it into his or her account. This could take several more days.
Sending a Check Abroad
Even though it's easy to issue a check, it may not be easy for the recipient to cash the check and check cashing can take up to 4 to 6 weeks. In addition, some banks may not honor foreign-drawn checks and may charge check processing fees.