Each year, about a million people in the United States become permanent residents, according to a Department of Homeland Security report. Once you get a “green card” (named after the color of the new permanent resident identification card), you are allowed to live and work permanently in America. In 2019, about 844,000 people made the transition from green card holders to United States citizens.
No matter what country you immigrate from, the American financial system can be confusing to newcomers. And there are plenty of roadblocks to financial access. “Many immigrants aren’t sure if they can access financial products like banks, credit cards, investments,” says Adina Appelbaum, a financial coach and co-founder of Immigrant Finance. “They don't know where to start since they don’t have the guidance from family or from school on how to manage money or build wealth. Plus, they often face extra expenses that personal finance books don’t talk about, like an immigration lawyer, immigration application fees, sending money abroad and being the retirement plan for their extended family.”
As a result, many new immigrants rely heavily on the alternative financial services sector to send remittances, cash checks and pay bills. But using non-mainstream banking methods might harm your economic prospects in the long term. “These alternative financial services can often involve very high fees,” warns Appelbaum. “Many immigrants aren’t aware that they shouldn’t have to pay such high fees and that they are eligible to access other financial products with lower fees. They end up losing money that they could be investing to build generational wealth for their families.”
Appelbaum teaches immigrants about financial literacy and how to advocate for themselves when it comes to money. Here, she lays out everything a new immigrant needs to know to make sure their American journey is off to a strong start.
How Do I Open a Bank Account?
You can open a bank account online, over the phone or in person. Whichever method you choose, you’ll need to show a government-issued form of identification (like a driver’s license, green card, passport or military ID). According to the Consumer Financial Protection Bureau, you’ll probably also need to provide a Social Security card, a bill with your name and address on it and your birth certificate. Depending on the type of account you want to open, there may be additional steps.
Here are the most common types of bank account:
● Checking account: This is used to make and receive payments. The money in this account is typically used for daily transactions, like paying bills or other expenses. The bank issues you a book of checks (a written, dated and signed instrument that directs a bank to pay a specific sum of money to the bearer) and a debit card, which allows you to pay for purchases or withdraw money from your checking account at automatic teller machines (ATMs).
● Savings account: This type of account allows you to deposit and withdraw money and earns you interest on the balance.
● Money market account: Think of this as similar to a savings account with some of the features of a checking account. However, you are usually limited in how many transactions you can make each month.
Before you sign up for any financial product, ask questions, suggests Appelbaum. “Make sure there are no hidden fees or minimum deposit requirements.”
Can I Transfer My Savings to an American Bank?
You may bring money into the United States in cash or as a money order. Still, any sum larger than $10,000 will need to be declared to U.S. Customs and Border Patrol. If you bring money in that way, you may be able to deposit it into your new American bank without fees. Transferring money via an international wire transfer may be easier and more secure, but fees are associated with the transaction.
To help reduce bank fees and streamline the process, Appelbaum suggests finding an international bank in your home country with branches in your native country and the United States.
How Do I Pay Taxes?
The good news: If you work as a full-time employee, income taxes are already automatically deducted from your paycheck. The bad news: You still have to file a tax return every year, usually in the middle of April.
However, if you are a self-employed worker, no tax will be taken out of your checks. And your taxes will be handled much differently—the government suggests this type of worker pay their taxes every quarter. Self-employed individuals also must pay self-employment tax in addition to regular income tax.
If you’re confused by all the forms and boxes, check out the IRS’s Volunteer Income Tax Assistance (VITA) program. It offers free tax help to people who generally make $56,000 or less, people with disabilities and taxpayers with limited English proficiency. But if your finances are not complicated, Appelbaum suggests you use an online software program like Turbotax.
Other types of taxes include sales tax, a tax on most retail goods and services; and property tax, a tax on real estate you own that’s calculated based on location and how much it’s worth.
How Do I Establish American Credit?
Without a U.S. credit history, it is tough for immigrants to get a credit card, rent a house or even land a job. In some cases, you can transfer your previous credit history to America. (Nova Credit pulls your international credit report for free and gives you an estimate of what your U.S. credit score might be.)
If you have to establish credit from scratch, start by getting a secured credit card, advises Appelbaum. Unlike a traditional credit card, you must put down a deposit to apply for a secured credit card. If you are approved, you can’t charge more than that deposit. Make sure you pay your bills on time, and over a few years, you’ll be able to establish credit.
How Do I Save for Retirement?
While some social safety programs like Medicare and Social Security exist, you must save your retirement money yourself. According to a report by USA.gov, most Americans use a multipronged approach when it comes to saving for retirement. They rely on three things: retirement plans offered by their employer, savings and investments and Social Security. (Estimate your Social Security benefits with this calculator, and then open an account when you can.)
Whatever you do, start saving early, urges Appelbaum. Because of the power of compound interest (the interest you earn over interest), your money grows exponentially due to interest building upon itself over time.
Here are two common ways to save for retirement:
● 401(k) account: Employers offer these plans, which are funded via pretax payroll deductions. And while money grows tax-free in a 401(k), all withdrawals in retirement will be taxed.
● Individual retirement account (IRA): Self-employed individuals who don’t have access to a 401(k) can invest for their future via IRAs. Contributions you make to an IRA may be fully or partially tax-deductible, depending on your filing status and income. The money in your traditional IRA (including earnings and gains) is not taxed until you take a distribution (withdrawal) from your IRA.
What Government Programs Are Available?
You or your family might be eligible for federal benefits depending on your immigration status, length of time in the United States and income level.
● Medicare: This is the federal health insurance program for people who are 65 years old or older, under age 65 with certain disabilities or have end-stage renal disease. Medicare pays for primary care and specific services if you are sick or injured.
● Supplemental Nutrition Assistance Program (SNAP): SNAP provides you with funds to help you buy food at grocery stores. Some states have state-funded food assistance programs with different rules for immigrant eligibility that may vary from state to state.
● Federal benefits and services for survivors of domestic violence: Immigrants and their children may be eligible for federal benefits and services, such as housing at battered women’s shelters or SNAP.
● Temporary Assistance for Needy Families (TANF): This program provides assistance and work opportunities for qualified low-income families.
● Federal financial aid for college students: The U.S. government provides financial aid to help students pay for their education, such as tuition, fees, room and board, book supplies and transportation. Students qualify based on financial need—not grades.
Welcome to the United States!
As a new American citizen or a green card holder, there are many resources available—you’ll just need to know where to look. Start your journey with the official guide for new immigrants, which may not have all the answers, but will get you started.
Maridel Reyes is a journalist based in New York. Her work has appeared in Forbes, Bloomberg Businessweek, the New York Post, USA Today and The Boston Globe.
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