Banking and Credit

Most financial transactions are cashless these days. You will likely not be able to pay cash to buy a car or rent an apartment. Americans will also want to see your credit history before approving you as a tenant or giving you loans or credit contracts. So, among the first things upon arrival, you will need to open a bank account and start building your credit history.

Bank Account

You can choose any major bank to open an account. Some of the most popular U.S. banks are Bank of America, JP Morgan Chase, Citibank, Wells Fargo and Capital One.

The first account you need to open is called checking account. You will use this account to receive your salary and earnings and pay your bills and rent. Checking accounts often have small monthly service fees, which are waived if you maintain a certain minimum amount of money in the account or receive regular wage deposits into the account.

To open an account, you typically need:

• Two forms of ID (your passport is one; the second can be your driver’s license, state ID, employment authorization card, a visa in your passport, I-94, a Ukrainian or European bank card, a signed Social Security card or a birth certificate with certified translation),
• Social Security Number (some banks do not require it to open an account), and
• A proof of residence (typically, a lease or a utility bill. If you don’t have these, try offering a government letter in your name and address, such as a letter from Social Security Administration, USCIS, your health plan or social services).

When you open a checking account, the bank will issue a debit card for it, which you will receive in the mail. You can use the debit card to withdraw cash at ATMs and make recurring online payments (e.g., pay rent and utility bills). You can withdraw cash any bank’s ATM using your debit card, but if it’s not your bank’s ATM, it will charge you a $2-5 fee for the transaction.

The bank may also offer you a checkbook to write paper checks from your checking account. Many organizations still accept paper checks as the primary payment method, so it is useful to have a checkbook.

Once you open an account, the bank will send you monthly statements by mail or via the banking app. A bank statement with your address on it serves as your proof of residence.

If you want to start saving money, you can also open a savings account. Savings accounts are interest-bearing and secure: you do not give your savings account number to anyone, and it cannot be accessed via a debit card. Only you can access it via your banking app or in person at the bank.

Money Transfers and Payment Systems

Domestic Transfers

The most common way to send money to another U.S.-based individual is to use payment system Zelle. It is usually accessible from your banking app. You can add a Zelle recipient in your banking app by their email address or phone number and initiate a transfer from your bank account to theirs. The other popular personal money transfer apps are Venmo and PayPal.

If you need to make payments to an organization (e.g., apartment rent, utility payments, loan payments), they typically accept paper checks, electronic checks (ACH) or debit card payments. To initiate an ACH payment, you will need to provide your bank account number and routing number to the recipient organization through its secure payment portal and authorize the payment amount. These portals typically allow you to set up automatic monthly ACH withdrawals from your bank account if the payments are recurrent.

International Transfers

If you need to send money internationally, you can do that in two ways:

1. Use a pay system such as Paysend, Wise, Western Union, Revolut or PayPal. Some of them do not charge fee for sending money to Ukraine.
2. Wire money directly from your bank account. You need to google the international wire transfer instructions for the recipient bank (including the bank account number and IBAN or SWIFT number) and provide this information to your bank.

Transfers from foreign banks to U.S. banks are done in the same way. Note, that Ukraine imposes limitations on money transfers out of the country due to the military state.

Credit History and Credit Score

In the United States, it is extremely important to have long credit history and a good credit score. Your credit history not only affects your ability to rent a house, get a credit card, or a car loan, but various government agencies use it to verify your identity and give you access to various government services. So, you should start building your credit history as early as possible.

Understanding Credit, Accessing Loans & Auto Insurance

See a webinar for Ukrainian refugees (video recording) featuring a guest speaker from the California Department of Insurance who offers an overview of credit, loans, and insurance for UHPs and sponsors. It covers key topics such as credit scores, loan products, affordable auto insurance, and tips on avoiding scams and fraud (slides: English, Ukrainian, and Russian).

What are credit history and credit score?

Credit history, as the name suggests, is simply a history of your taking and paying off credit. Credit can come in various forms: for example, it can be a traditional loan to buy a car, a house or a new phone, or it can be a credit card where you use the bank’s money to make purchases and then pay the bank back at the end of the month.

When a bank lends you money, it reports the information about the amount of your loan or credit and subsequent payments you make on it to organizations called “credit bureaus.” There are three main credit bureaus in the U.S. – Equifax, Experian and TransUnion. These credit bureaus store your credit history tied to your Social Security Number. They also store other information about you that the banks report to them as part of your credit file, such as your addresses and employment history. Each loan or line of credit that you open helps build your credit history – in a positive way if you pay your bills timely or in a negative way if you don’t.

The quality of your credit history is reflected in your credit score. Credit score is a number between 300 and 850 that “grades” the timeliness of payments and how prudent you are with your credit.

You can check your credit score in your banking app, or in the app Credit Karma. Your initial credit score appears about 6 months after you start using your first credit card – that is how long it takes the bank to send information about your first few payments to the credit bureaus. A credit score of 670 and up is considered good, so you should aim to never have your credit score drop below that number.

What affects your credit score?

If you just opened your first credit card and are making timely payments on it, your starting credit score will probably be around – 670 – good with a potential to grow better. From there, your approach to credit can make it excellent or kill it entirely. Your credit score is affected by several main factors:

• Timeliness of payments is the biggest factor. For the best impact on your credit score, always pay your loan and credit card bills by the due date.
• Amount owed. If it’s a loan, the higher it is, the more negatively it will impact your score. If it’s a credit card, the higher your bill is as compared to your credit limit, the more it will negatively impact your score. It is recommended to keep your monthly bill below 30% of your credit limit to build your credit score faster.
• Length of credit history. There isn’t much you can do to improve this factor other than to start building your credit history as soon as possible.
• Types of credit. A mixture of loans and credit cards works best for the credit score.
• New credit. The more loans or credit cards you try to open, the higher the risk you will not be able to pay off all debt, so an attempt to take a new loan or open a new credit card temporarily reduces your score a little. However, in the long term, additional credit lines positively affect your score if you make payments on time.

To build your credit score fast, it is best to gradually open 2-3 credit cards and use them evenly so that each is utilized by no more than 30% of its credit limit, have one or two loans (such as a car loan or a student loan) and always pay your bills on time.

Why are credit history and score important?

When you apply for a new credit card, a loan, a rental apartment or a post-paid phone plan, the bank, landlord or phone carrier will check your credit history and credit score to verify your financial trustworthiness. The longer your history and the better your score are, the better your chances are to get approved on favorable terms.

But credit history is important not only for getting new credit. Government organizations use your credit history stored at the credit bureaus to verify your identity when you access government services. If you have no credit history, it will be more difficult for you to obtain certain government services, e.g., get a transcript of your tax return or buy health insurance.

Credit Cards

The easiest way to start building credit history is to open a credit card. You can do that at the same bank where you have a checking account, or at a different bank. Unlike a debit card, which allows you to spend your own money, when you use a credit card, you spend the bank’s money which the bank loans you temporarily. Credit cards have many advantages over debit cards:

• Higher protection. Data breaches are common. You may not even know that a merchant where you made a purchase months ago stored your card information, but if that merchant becomes the victim of a data breach, your card information may end up in the hands of thieves. If you report fraud with a credit card, the bank will write off the debt caused by the thieves, and you will not suffer any losses. If, however, the money is stolen from your bank account through a debit card, the bank may refund only some of the loss, or none at all.
• Building credit history. Having a lengthy and good credit history is very important in the U.S. The use of credit cards contributes to your credit history, while the use of debit cards does not.
• Postponing expenses. When you pay with a credit card, you use the bank’s money and do not have to repay the bank until at least a few weeks later. If you cannot repay the full amount of the bill at once, you can make partial payments with interest over time.
• Credit card perks. Many credit cards offer additional rewards such as cashback, points that you accrue when you make purchases and can redeem for various goods and services, travel miles, rental car insurance, hotel discounts, etc.

How to Open a Credit Card

Before the bank agrees to loan you money via a credit card, the bank will want to see a proof of your income to make sure you have the means to pay back the loan. Be prepared to provide documents showing your income, such as paystubs or regular deposit of earnings to your bank account. Some banks will accept proof of foreign income. If you do not work yet, but receive cash assistance, such as TANF, RCA or SSI, you can show proof of that income to the bank.

A bank may decline your credit card application even if you have income but do not yet have credit history. To avoid that, you can first apply for a secured credit card. The bank will ask for a security deposit as a guaranty that you will make monthly payments on the card. The amount of the security deposit usually equals the credit limit on the card (e.g., if you deposit $1,000 with the bank, your credit card will have a $1,000 credit limit, meaning you will be able to use a maximum of $1,000 credit on the card). After 6-12 months of diligent use of the card, the bank will refund your security deposit and convert your secured credit card to a regular credit card. Bank of America, Citibank, Discover, Capital One, and U.S. Bank offer secured credit cards.

Another option is to open a Chase Freedom Rise credit card with JP Morgan Chase bank. This credit card is specifically designed for people who start building credit history.

How to Use a Credit Card