Money and Banking

US Monetary System

The US Monetary System is a decimal system, with one dollar equal to one hundred cents. One dollar is written as $1 or $1.00. One cent is written as 1¢. One dollar and twenty-five cents would be written as $1.25. Dollar amounts are written with a comma every three digits, so one thousand dollars would be written as $1,000.00.

Paper currency is used for amounts of $1 or more, and coins are used for amounts under $1. The most common coins and their dollar equivalencies are as follows:

Coin Figure on Front Value (Cents) Value (Dollars) Color
Penny Lincoln 1 cent 0.01 dollars Copper
Nickel Jefferson 5 cents 0.05 dollars Silver
Dime Roosevelt 10 cents 0.10 dollars Silver
Quarter Washington 25 cents 0.25 dollars Silver
Half Dollar Kennedy 50 cents 0.50 dollars Silver
Dollar Anthony 100 cents 1.00 dollars Silver

Because the Susan B Anthony dollar coin is similar in color and size to the quarter, it is easily mistaken for a quarter. To remedy this problem, Congress recently authorized the US Mint to issue a new dollar coin. The new coin will be similar in size to the current coin, but golden in color and with a distinctive edge. In any event, the dollar and half dollar coins are not in common use.

The front of the coin with the face is called “heads” and the other side is called “tails”. If you need to make a random choice, you can toss a coin and call it heads or tails while it is still in the air. If the side you call is up after the coin lands, you win the coin toss.

Paper currency is most often circulated in the following denominations: $1, $5, $10, $20, $50, and $100. Occasionally you will encounter a $2 bill. The denomination of all currency is clearly marked on the bottom of both sides of the bill, and on all four corners. Some stores will not accept bills larger than a $20. The $20 bill was recently redesigned to make it more difficult to counterfeit, so you will see both the new and old bills in circulation. All currency is green and printed using special paper. The slang term for a dollar bill is a “buck”, so $20 might be described as “twenty bucks”.

Each denomination includes a picture of a famous American statesman on the front. The following table describes the images on the various denominations.

Denomination Portrait on Front Illustration on Back
$1.00 George Washington Great Seal of the United States
$2.00 Thomas Jefferson Declaration of Independence
$5.00 Abraham Lincoln Lincoln Memorial
$10.00 Alexander Hamilton US Treasury Building
$20.00 Andrew Jackson White House
$50.00 Ulysses S. Grant US Capitol Building
$100.00 Benjamin Franklin Independence Hall

More information on US paper currency can be found at the US Treasury Fact Sheet on Currency and Coins and related collection of frequently asked questions about coins and currency, as well as the US Bureau of Engraving and Printing and US Mint.

Checking Accounts

You will need a checking account to pay bills, such as rent and utilities. It isn’t safe to send cash through the mail. It also isn’t safe to carry large amounts of cash on your person, so you should pay for most of your purchases using a check or credit card.

To open a checking account, visit a bank and ask to open a checking account. You will need to deposit money into the account when you open it. You can deposit cash or traveler’s checks, or arrange for a wire transfer from your home bank (cost around $35). American Express also offers a variety of services that make it easy to withdraw money from your checking account back home. Additional deposits and withdrawals may be made at any time.

The bank will ask you for your Social Security Number. If you are exempt from this requirement, fill out an IRS Form W-8, which you can obtain from the bank.

You can withdraw money from your account using a check or an Automatic Teller Machine (ATM) card. The check is a negotiable order of withdrawal that tells the bank to pay the money to the payee by withdrawing money from your account. When you open the checking account the bank will provide you with an initial set of checks with your name and address printed on top. Additional checks can be ordered in a variety of designs for a fee.

If there insufficient funds in your account to cover the check, the check will “bounce” and your account will be overdrawn. This means that the bank will refuse to honor the check and will return it to the depositor. In addition, the bank will charge you a bounced check fee of $15 to $35, so it is important to make sure you always have sufficient funds in your account to cover any outstanding checks. If the payee tries to deposit the check again (sometimes their bank will do this automatically), you will be penalized with a second bounced check fee for the same check. Many international students expect the bank to pay checks even when their account is overdrawn, and get a rude and expensive shock when they discover that the US banking system handles overdrawn accounts differently.

If you want your bank to honor checks even when your account is overdrawn, you must ask for overdraft protection. There is an extra fee for this service, and the amount your account is overdrawn up to a limit is treated like a short-term loan. (You pay interest on the balance due.) This feature can be expensive, but not as expensive as the service charges from bounced checks. Of course, you won’t need this feature if you carefully balance your checkbook and make sure that you always have sufficient funds in your account.

When writing a check, the amount of the check is written twice, once using numerals and once using words. If you were writing a check for $23.35, you would write the words as “Twenty-three and 35/100 dollars”, where the word “and” separates the dollar amount from the cents. You would write $23.00 as “Twenty-three and NO/100 dollars”. Draw a horizontal line through any leftover space, to prevent someone from adding extra digits to the amount.

At the end of the month the bank will mail you a statement showing all deposits and withdrawals from your account, as well as the current (ending) balance of the account. They will also return to you any cancelled checks. Cancelled checks are checks you wrote that have been processed. They are stamped (cancelled) to indicate that the money has been withdrawn from your account. Cancelled checks should be saved, since they provide proof of payment. This is especially important when you need a receipt of payment, such as for the security deposit on your apartment. You should reconcile the statement against your checkbook to make sure there are no errors.

Most banks offer a variety of checking accounts. Some banks will offer a “free” checking account with no monthly service charges if a minimum balance is maintained in the account. Typically the minimum balance is $1,000, although some banks require as little as $500 and some banks as much as $2,500. If your visa allows you to work and you receive a regular paycheck, you may be able to avoid the monthly service charges by having your paycheck direct deposited into the account. Also, certain checking accounts will pay interest if a minimum amount of money is kept in the account. Such accounts are known as “Checking with Interest” or “NOW Accounts”. But the interest rate on these accounts is very low compared with other investments, so you’re better off putting your savings elsewhere.

When you deposit checks into your account, there is a waiting period of a few days before you can withdraw the money. The length of the waiting period depends on the bank upon which the check is drawn. Local banks will have a shorter waiting period than out-of-town banks. This delay is to protect the bank in case the check bounces.

Most checking accounts will include a debit card you can use to withdraw money from your account at any ATM, 24-hours a day. This lets you make deposits, withdrawals, and other transactions (e.g., balance inquiries) at any time, even when the bank is closed. ATMs are very convenient because they are located throughout the city near shopping areas and sometimes even inside grocery stores. (Banks like ATMs because it is much cheaper to install and service an ATM than to open a branch office and pay a human teller.) Most people don’t carry a lot of cash, because they can get cash from an ATM when they need it. ATMs limit the amount of your daily withdrawals to a maximum of $300, as a safety measure. (ATMs are known as MAC machines in some parts of the country.)

If your ATM card is ever stolen, notify the bank immediately. Your liability for a stolen or lost card is limited to $50 if you report the loss promptly.

Be careful in selecting an ATM to use, because the bank that owns the ATM can charge a fee (typically $1.00) in addition to any fees your own bank may charge for ATM withdrawals. So it is best to use your ATM card to withdraw money only from ATMs owned by your bank. Although you can make withdrawals from almost any ATM, deposits should be made only at your bank’s ATMs.

The two national ATM networks are PLUS (1-800-843-7587) and CIRRUS (1-800-4-CIRRUS or 1-800-424-7787). (There are a few smaller regional networks, such as Trinet, but most ATMs are on one of the national networks.) The networks to which your bank’s ATMs belong is indicated on the back of your debit or credit card. Although you can use an ATM on the other network, your bank will probably charge you a larger fee for using an ATM that isn’t on the bank’s home network.

Some banks offer a debit card that combines the features of an ATM card with a credit card. You can use it like a regular Visa card, except the charges are directly debited from your checking account. This is in contrast to regular credit cards, which provide a grace period of 20 to 25 days for you to pay the bill before interest is charged. On the other hand, it helps avoid the temptation to carry a balance on the card. If you don’t already have a credit card, it is worthwhile because international students sometimes find it difficult to qualify for a credit card after arriving in the US.

If you have an ATM card from a foreign bank, ask the bank whether your Personal Identification Number (PIN) will work in the US. Some banks will give you a different PIN for transactions abroad.

Although using a credit card to obtain a cash advance is not normally a good idea because of the high interest charges and fees, there is one aspect worth mentioning. If you get a cash advance using a foreign credit card, the exchange rate is the wholesale exchange rate, not the retail exchange rate. This is a somewhat better rate. Sometimes the savings will compensate for the interest and fees.

In recent years, utility companies have started offering direct debit services, where they deduct the monthly bill directly from your checking account. There’s no charge for this service, and it saves you the cost of a postage stamp. It is recommended that you sign up for the direct bill payment services offered by the utility companies.

Other types of bank accounts include savings accounts and certificates of deposit. Savings accounts earn interest, but do not include check-writing privileges. A savings account will pay a higher rate of interest than a checking with interest account. You can use an ATM card to withdraw money from a savings account. Certificates of Deposit (CDs) earn an even higher interest rate, but do not allow you to withdraw the money until maturity (typically one year, but other terms are available). If you need to withdraw the money before maturity, you will have to pay a substantial penalty for early withdrawal. CDs require a large minimum deposit, typically $500 or $1,000, and are used strictly for savings.

All of your bank accounts are insured against loss up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). The FDIC is a federal agency that protects you against losses caused by bank failure.

Most students choose the bank that is most convenient for them. This may be the bank with a branch closest to their home, a bank located adjacent to the grocery store, or a bank near school. Another consideration is the fees charged by the bank (especially for ATM card usage) and the minimum balance required for waiving the monthly service charge.

Bank lobby hours typically run from 9:00 a.m. to 4:00 p.m., Monday through Friday. Some banks open as early as 8:00 a.m. or as late as 10:00 a.m. Some banks are open on Saturdays. Very few banks are open on Sunday. Most banks are closed during national holidays.

Credit Cards

If you pay for purchases at retail stores using a check, they will want to see some form of identification, such as a driver’s license or a major credit card (Visa, MasterCard, Discover, and American Express). A passport can also serve as a photo identification, but it isn’t wise to advertise that you’re an international visitor. Also, checks are only accepted if they are drawn on an in-state bank, so you cannot use them if you travel out of state.

Credit cards are such an ingrained part of the American way of life that you will have trouble making certain purchases with anything other than a credit card. If you want to place an order by phone, cash a check, rent a car, or buy airline tickets, you need to have a credit card.

So it is better to use a credit card to pay for purchases. But you must take care to pay off your balance in full at the end of the month. Otherwise you will incur interest on the balance. This can substantially increase the balance due.

Many international students find it difficult to get a credit card in the US, because they do not have an established credit history. (Also, the credit card issuers are concerned that international students might eventually return to their home countries and default on the balance remaining on the card.) So if you already have a major credit card such as a MasterCard (Eurocard, Access, Chargex), Visa (Barclaycard, Carte Bleue), or American Express, it is a good idea to bring it with you. American banks can check your credit limit on the foreign card, and this may make them more likely to issue you a credit card. Also, if you opened a checking or savings account with a bank that offers credit cards, it may be easier to get a credit card from that bank since you have money on deposit with them.

Before a credit card issuer will grant you a credit card, they will conduct a thorough credit check. They will want to know information about your salary and the name of your employer, how long you’ve been in the US, and information about your expenses. Some banks will not issue a credit card until you’ve been employed in the US for at least six months. Other banks will make an exception if you work for a large, well-known employer. If you are a graduate student and receiving a stipend and tuition waiver, include the tuition waiver when figuring your gross income.

Because getting a major credit card is very difficult for international students, you should take every opportunity to establish a good credit record. Be careful to not bounce any checks. If you open a department store credit card, pay the bills promptly. Mailing your payment late several times or missing a single payment can ruin your credit rating. After you’ve established a good credit history, it will be easier to get a major credit card.

Since you will not be carrying a balance, you should apply for a card that does not charge an annual fee. (Make sure that the card includes a grace period, so that no interest is charged if you pay the balance in full when you receive the bill. Credit cards are required to disclose the interest rate and any fees on the card application.) There are even a few “rebate” cards that pay you for using the card by issuing a small credit. For example, the Discover Card (1-800-DISCOVER) has no annual fee and offers up to 1% cash back on your purchases using the card. The local telephone company may offer a credit card, with the rebates applied toward your telephone bill. The credit card companies will have tables set up on campus with applications and you can also find applications on bulletin boards around campus or at the college bookstore. The Bank Rate Monitor and CardTrak web sites also provide information about the least expensive credit cards.

The major credit cards in the US are VisaMasterCardAmerican Express, and Discover. Visa and MasterCard are offered by many banks and financial institutions. American Express and Discover Card are each offered by only one financial institution, but are accepted by many businesses.

Traveler’s Checks

Traveler’s Checks are one of the safest ways to transport money. If the traveler’s checks are lost or stolen, you can easily get them replaced. Do not countersign the checks until you are ready to use them.

If you bring traveler’s checks with you to the US, you should bring traveler’s checks that are denominated in US funds. Most businesses will accept US-denominated traveler’s checks. Taxi drivers and bus drivers will not accept traveler’s checks, so you should bring some US currency with you as well.

Within the US, you can purchase traveler’s checks from many travel agencies, banks, Thomas Cook, and American Express offices for face value plus a 1% commission. The American Automobile Association (AAA) sells them to members without charging a commission.

Aside from the AAA, the three largest sources of traveler’s checks are American Express (1-800-221-7282), Citicorp (1-800-645-6556), and Thomas Cook (1-800-223-9920).

Exchange Rates

Some banks will exchange foreign currency for a fee. No bank, however, will exchange foreign coinage. You can also exchange currency at the airport or at a major hotel. You can also exchange currency through Thomas Cook Foreign Exchange. Call 1-800-287-7362 for the nearest location.

Exchange rates are usually printed on the financial pages of the local newspaper. For example, the New York Times publishes currency conversion rates in the Sunday edition of the newspaper. You can also get daily exchange rates from several web sites:

You can specify the date of the currency conversion with the Classic 164 Currency Converter.

The following two forms use the Universal Currency Converter™ site to convert to and from US Dollars. If you need to convert to or from a currency not listed, you can find a more detailed converter on the Universal Currency Converter™ web site.

   to US Dollars
  US Dollars to 

The Universal Currency Converter site also provides an Interactive Currency Table, which will display a currency table denominated in units of the currency of your choice. They also offer a free Currency Update Service that sends you regular currency table updates by email.

The following table lists exchange rates as of December 4, 1998, for major world currencies. Although currency exchange rates fluctuate every day, drastic changes are rare, so these rates should be approximately correct for several months.

Currency Value of 1 Unit
in US Dollars
Value of $1 US
AUD Australian Dollars 0.6291 1.59
BRR Brazilian Real 0.8332 1.20
CAD Canadian Dollars 0.6508 1.54
CHF Swiss Francs 0.7304 1.37
DEM German Marks 0.5984 1.67
FRF French Francs 0.1785 5.60
GBP British Pounds 1.6621 0.60
HKD Hong Kong Dollars 0.1291 7.75
ITL Italian Lira 0.0006 1650.00
JPY Japanese Yen 0.0083 120.24
MXP Mexican New Pesos 0.1003 9.97
NLG Dutch Guilders 0.5311 1.88
NOK Norwegian Kroner 0.1347 7.42
NZD New Zealand Dollars 0.5277 1.90
SAR Saudi Arabian Riyal 0.2666 3.75
SEK Swedish Krona 0.1242 8.05
SGD Singapore Dollars 0.6081 1.65
XEU European Currency Units 1.1733 0.85
ZAR South African Rand 0.1770 5.65

It is a good idea to read the advertising circulars that accompany the Sunday newspaper carefully, to familiarize yourself with current prices on a variety of products. This will help you learn to think in dollars, and to distinguish a bargain from a rip-off. It is also helpful to measure the cost of items relative to a common expense, such as the cost of a candy bar or can of Coca Cola. You can use this to get an intuitive feel for the cost of an item. For example, a $5 lunch is inexpensive and a $20 lunch is expensive.

It is also helpful to have a heuristic for the correspondence between your native currency and US dollars. For example, since about 120 Japanese Yen equal one dollar, you could use the heuristic that yen are pennies. Since this overvalues yen by about 20%, you would need to be careful to not overspend. But it is close enough that it could give you a quick estimate of an item’s value. You should try to round the multiplier up, where possible, so that your heuristic will make you a little conservative in your spending habits. For example, using a multiplier of 1 for converting US dollars to European currency units will overvalue ECUs by about 10%. Such heuristics can give you an intuitive feel for the currency. For detailed budgeting, however, you should always use the current exchange rate.

International students sometimes run into trouble because of fluctuations in the exchange rate. If your home country’s currency is decreasing in value, it is strongly recommended that you conduct all transactions in the currency of the country in which you will be studying. For example, try to get loans issued in the foreign currency. Otherwise, if the value of your country’s currency drops, you could find that you have much less money than you expected.