A Personal Finance Guide For International Students

A debit card is a convenient way to make everyday purchases and gain access to your cash when you need it. Carrying a debit card means you don’t have to carry cash with you. If you do need cash, you can take the card to an ATM  -- short for “automatic teller machine” -- to withdraw some. Certain stores, typically grocery and drugstores (pharmacies), will allow you to ask for some cash back when using your debit card for purchases. And the stores don’t typically charge for this. Often, unless you use an ATM at a branch of the bank you have an account with, you’ll be charged a fee. Sometimes, two fees, one from the ATM you used and another from your bank, for processing the withdrawal from an outside bank! 

When you open a checking account, you’ll receive a few paper checks with the option to order more. Paper checks can be used to pay bills, but most bills can be paid online. The checks are handy, though, because they have your routing number and bank account number printed on the bottom. These are two pieces of information you’ll sometimes need when paying bills online, for example. 

Nearly all banks allow for online banking, and we strongly suggest you create an online account. Once the bank account is established, you can easily log into the bank and provide some information. Online banking allows you to see your balance, make mobile money transfers to other people, between accounts and pay your bills.  

There are banks that charge fees for checking accounts, but there are plenty that don’t. Look for a bank that doesn’t have a monthly fee or charge for things like having less than a certain balance or getting a paper copy of your statement. Many banks offer accounts specifically for college students and, in some cases, international students. 

Given the number of bank account options that are now available, there is no reason that you should  have to pay monthly or other opaque fees simply to have access to a basic checking account.  Shop around!  Upwardli can make it easy to find no fee checking accounts that suits your needs.   

How to Open a Checking Account

More and more banks now make it possible to open an account online; but in some cases, you may have to visit a branch to open your account. 

Banks require you to present certain identifying documentation in order to open an account.  While each bank may differ slightly in their requirements, you can find most banks’ specific requirements online.  Before you go to open an account, you should expect to present the following information to the bank -- either in person or via the online onboarding process: 

• Your passport

• Student visa

• A second form of photo ID 

• Proof of enrollment

• Money available to make an initial deposit

It is a common misconception that you need to have a Social Security Number to open a U.S. bank account.  This is not the case.  You do not need a Social Security number to open a bank account; rather, you simply have to prove your identity to satisfy the bank’s identification policy. If you do not yet have an SSN, there are many banks that you can still open an account with.  

Create a Budget

Creating and sticking to a budget is the first step and most crucial step to financial health. And everyone should budget no matter how little or how much money they have. A budget gives you vital information on your financial situation -- how much money is coming in, how much is going out and where it’s all going. 

Some online bank accounts and credit cards come with free budgeting tools.  But if you’d like to get more detailed, there are multiple online budgeting tools that make budgeting easy.  We like Mint, it’s easy to set up, maintain, and it’s free!  YNAB - or “You Need a Budget” - is another good option, but requires a paid subscription.  

Whether you use an online tool or simply keep track of your budget yourself, you should establish a formula for your budgeting depending on your financial goals.  There are many many formulas for budgeting, but some of them are unnecessarily complicated. The key is to pick a format that works for you and to stick with it.  

We recommend the 50/3020 budget method; it’s straightforward. The numbers you’ll need are your net monthly income (the amount you have left after any taxes are taken out in the case of those who are working), and a list of all of your monthly expenses; housing, auto (payment, insurance, gas), food (groceries, dining out, delivery, snacks), insurance, utilities, etc. Once your expenses are known, you apply the formula to establish your financial budget.  

You’ll break down your budget categories this way:

• 50% - Essentials: These are the non-negotiables, things you have to pay like housing, utilities, groceries. Half of your net income should be budgeted for these things. 

• 30% - Discretionary: These are expenses you could cut if you had to. Things like gym memberships, dining out, subscription services (Netflix, Spotify, etc.). 30% of your net income can be budgeted for these items.  

• 20% - Goals: This portion is for your savings, the money you put aside for future goals like an emergency fund, tuition, investing, a car, house or even just a vacation.  20% of your net income should be budgeted for your financial goals.  

The most important part is the 20%. If you start “paying yourself first” -- that is, by automatically putting 20% aside before spending anything else -- right now and keeping it up as long as possible, you will have gone a long way towards securing your financial future, no matter how much or how little money you make in your career. If you can’t find that 20%, make cuts in other categories until you can. It is vital and your future self will thank you. 

Fortunately for you, having a student ID and .edu email address gives you access to discounts on a wide variety of things both from large national companies and local businesses in your area. Here are just a few examples of places where your student status may get you a discount:

• Amazon Student Prime

• Apple Music

• The New York Times

• Amtrak

• Museums

• Public transit

• Movie tickets

• Car insurance

• Cell service

• Sam’s Club

• Banana Republic

• FedEx

If in doubt - ask!  Lots of businesses offer student discounts - especially in areas around your university. 

Credit and Credit Cards

Credit and credit cards are a big part of American financial life, especially if you hope to stay in the U.S. long-term. If you don’t plan to stay in the U.S. after graduating, you can skip this next section, but if you are even considering staying in the U.S. after graduation, keep reading! 

If you don’t plan to stay, the credit cards you opened in your country will generally work in the U.S. and you won’t need to build a credit score here. However, we do advise all college students to have a credit card. A credit card can be helpful in emergencies like paying for an unexpected expense like a car repair or booking a flight should you need to fly home on short notice. 

Establishing U.S. Credit as an International Student

America runs on credit, not cash. As such, every person who has opened a credit card or taken a loan will have a credit file. That file contains things like what kind of credit accounts you have, how much of your available credit is being used, how much is available, if you’ve been late making payments, and if you’ve filed for bankruptcy or have civil judgments against you. 

If you haven’t used financial services in the U.S. before, you won’t have a credit file or a credit score automatically -- and will encounter challenges when accessing financial services until you have established some credit history in the U.S. This can be a frustrating experience for many newcomers. We understand! But with some basic understanding of how the system works and a deliberate strategy, you can not only establish your credit history quickly in the U.S., but start building your credit score fast -- paving your way to access to better services, like rewards credit cards, and much lower payments on nearly every significant purchase you will make going forward, from credit card purchases to a car or a house. 

Below are the services that are considered credit accounts that are taken into account in your credit file:

• Credit cards 

• Store brand credit cards

• Lines of credit

• Student loans

• Personal loans

• Auto loans

• Mortgage

• Home equity line of credit (HELOC)

Information on your payment history for each of these services is consolidated on your U.S. credit report. If you don’t have enough credit history to generate a credit score, you have what is called a “thin credit file.” Those newly immigrated to the U.S., young people, and people who prefer to use only cash will all have thin credit files. Again, having a ‘thin file’ is not desirable as it will make it harder for you to access the services you may want or cause you to pay much more so to do so.  

There are three main credit reporting bureaus, companies that compile this information and provide it to potential lenders. Those bureaus are TransUnion, Experian, and Equifax. Each has a formula it uses to turn that information into a three digit number that is used to approximate the risk of lending to you, generally ranging from 300-850. 

The higher that number, the better the interest rates lenders will offer you on things like personal, auto, and home loans. Generally, you can get the best rates with a score of 760 or above. The better your interest rate, the cheaper it will be for you to borrow money. And that’s important because interest is expensive -- even small differences in your interest rate can have a big impact. Let’s look at an example using a $100,000 home loan:

• Home price: $100,000

• Down payment: $20,000

• Loan: $80,000

• Interest rate: 3.8%

• Term: 30 years

• Interest paid: $54,195.72

When we re-run those numbers, with just a 1% difference in the interest rate, 4.8% rather than 3.8%, the total interest paid is $71,103.62, a difference of almost $17,000. When you look at those numbers, it’s easy to see why it’s important to build credit and to have a good credit score. 

This principle applies to whatever large purchase you may be making.  Whether it is a credit card, car loan or a home mortgage a better credit score means you will pay less in interest.  So, if you take nothing else from this section, remember that building a good credit score is one of the best financial investments you can make. 

What is a Good Credit Score in the U.S.?

As stated above, credit scores typically range from 300-850, the higher the better. The breakdown looks like this:

• 300-629: Bad/Poor

• 630-689: Fair

• 690-719: Good

• 720-850: Excellent

You can get a free copy of your credit report from each bureau once a year here. There are also plenty of sites that give you access to credit score from one of the bureaus for free.  Many credit cards now provide credit score monitoring as a part of their service offering.  

Your credit score is made up of five factors. Each bureau weights each factor slightly differently, but the order of importance is basically the same across all scores:

• Payment History (35%): 

  • This indicates if you have paid your bills on time or if you have ever paid late. Never pay bills late! This is the most critical factor. 

• Utilization (30%): 

  • This is how much you owe compared to how much credit you have. It’s best to keep it under 30% for credit score purposes, but of course, less than 30% is even better. For example, if you have two credit cards, each with a $500 limit, you have $1,000 of credit. To keep utilization under 30%, you would need never to have a balance of more than $300 between the two cards. So, even if you don’t use your credit, you can see why it is useful to have credit. 

• Length of Credit (15%): 

  • This is how long you’ve had a credit file - the longer the better!  Another reason to get started early.  

• Type of Credit (10%): 

  • How many different kinds of credit you have, see the bulleted list above. 

• Credit Inquiries (10%): 

  • Each time you apply for credit, a credit card, a loan, etc., the potential lender pulls your credit report. This “hard pull” lowers your credit score by a few points. Some providers don’t do a “hard pull” on your credit - so you can avoid the negative impact with certain credit providers. 

Building Credit as an International Student

It takes time to build credit, in part because a portion of your credit score is based on how long you’ve had credit, so it’s best to start as soon as you can. 

Open a Bank Account

Opening a bank account helps you establish a relationship with a bank. The bank can see your account’s history, how much and how often money is deposited, the average balance you maintain, and if you overdraw your account. If you’re a “good” customer and have funds in your account, the bank may be more likely to approve you for a credit card or loan. While having a bank account will not itself build credit, 

Open a Credit Card

Most credit card applications require a Social Security Number or Taxpayer Identification Number (ITIN). However, there are credit cards exclusively for international students that only require a passport to apply. 

If your application for a “normal” credit card is rejected, you can always apply for a secured credit card. This is a card that requires a deposit. If you default on payments, the company keeps the deposit. Sometimes the deposit amount is your credit limit; other times, your limit may be more than that amount. Some secured cards allow you to transition to a traditional card after a period of on-time payments. Be sure the card reports your payments to the credit bureaus. 

If you have a close relationship with someone who has a credit card, they may be willing to add you to their account as an authorized user. This gives you a card in your own name, and you will make the monthly payments. If you default, the account holder is responsible for the charges. Not all cards report your payments as an authorized user to the credit bureaus, so be sure to choose a card that does. 

Many stores in the U.S. will offer store cards; these are credit cards that can only be used in a branch of that store. These cards are often easier to be approved for than regular credit cards, and they do report to the credit bureaus. 

There are also multiple credit card comparison sites that can be used to conduct additional research on various card options.  Upwardli can help you identify credit card that you are pre-approved for and the right mix of credit card to build your credit score fast.  

Report Your Rent

If you rent an apartment rather than live in student housing, you can have your rent payments reported to the credit bureaus. Some landlords use this service, so there will be no cost to you. If your landlord doesn’t, you can sign up for a service that will report your payments, like Rental Kharma or Rent Reporters, but be aware that these and similar services often carry a charge. 

Get a Credit Builder Loan

A growing number of providers offer credit builder loans. In reality, a credit builder loan is more like a savings account than a loan. Each month you make a deposit and at the end of the loan term, you receive the loan amount. As the purpose is to build your credit, make sure the service provider reports to all three credit bureaus. This can be a good addition to building credit using a credit card as it adds variety to your credit profile.

We like the SeedFi Credit Builder Plan, which allows you to contribute $10 or $20 per paycheck (or twice that on a monthly basis) on a recurring basis over the life of a 6 to 24 month plan until you reach approximately $500 contributed.  Each month you make that payment and SeedFi reports your credit to all three bureaus.  At the end of the plan period, you get most of the money back - $500, building your credit and savings at the same time.  Unlike most credit builders, SeedFi does not require a social security number, which is another bonus for international students who may not yet have obtained their SSN.  

Using Your Credit Cards Responsibly

Despite what you may have heard, credit cards are not inherently evil. If used well, they can provide a lot of excellent benefits and build your credit in the process. If not used well, they can ruin your financial life. Let’s look at the good news first. These are some perks credit cards can offer:

• Consumer protections: Things like extended warranties, price protection, theft protection, chargebacks, fraud protection. 

• Travel benefits: Points toward free flights, hotel stays, airport lounge access, free TSA Pre-Check and Global Entry, free checked bags on flights, trip protection in case of a cancellation, rental car insurance, lost luggage reimbursement. 

• Cashback: A percentage of cashback on all purchases made on the card. These usually range from 0.5% to 1.0% percent, with some up as high as 1.5% or more for cards that are generally targetted at people with high credit scores.  

There are dozens of credit cards to choose from. Some require higher credit scores than others, especially those with more substantial rewards programs. Some cards charge an annual fee, but plenty do not. That fee can be worth it for some people if they take advantage of the card’s perks. Do some research to find a card that best suits your needs. 

How do you use a credit card wisely? The answer is quite straightforward; you pay off the entire balance of each card every month. That’s it. What happens if you don’t? Remember the interest rate example we looked at above? Let’s look at one for credit card interest. 

• Balance: $1,000

• Interest rate: 16% (This is an average rate for credit card interest)

• Minimum monthly payment: $40 (The average minimum payment is around 4% of the balance)

• Payoff date: 66 months

• Interest paid: $396.70

It took five and a half years to pay off that relatively small balance, and you paid nearly $400 in interest.  Bad deal!   

But the average American has much more credit card debt than that, $5,525! Let’s run the numbers on that to make the point. 

The monthly minimum payment would be $221, it would take 130 months or nearly 11 years to pay it off, and you’ll have paid $2,659.15 in interest -- nearly half of the total value of the amount borrowed. And these numbers are if you aren’t adding additional charges to those cards, which is not usually what happens. People pay the minimum payment and run the card up again. It’s easy to see how credit card debt can spin out of control. 

So, what’s the takeaway? It’s actually simple - get at least one credit card but always repay it in full before the due date. Used properly, they are a helpful financial tool that can give you spending flexibility, valuable rewards, and a continued march towards a great credit score. Pay the balances in full each month, or you may get into a spiral of debt that is hard to climb out of and a worse credit score in the process.   

Insurance 

University students may need three kinds of insurance: medical, renters, and auto, depending on their situations. These plans will protect you from unexpected events that could provide financially ruinous, so we recommend that you 

Medical/Health Insurance

Medical care in America is costly. We strongly recommend purchasing medical insurance as a student. If you need even minor medical care, it could cost you thousands of dollars if you’re uninsured. 

Many colleges and universities offer health insurance to students. As you’re buying in a large group, these policies will often be more affordable than purchasing insurance as an individual. If your school doesn’t offer health insurance, some carriers specialize in insuring international students. American students have the option of remaining on their parent’s insurance until age 26. 

Renters Insurance

Renters insurance covers you for loss or damage of your personal property, gives you liability coverage if someone were injured in your apartment, and reimburses you if your home were made uninhabitable due to a covered event, like a natural disaster.

American students living in dorms may have coverage under their parents’ homeowners insurance. International students living on or off-campus should purchase renters insurance. These policies are generally very affordable, around $15-$30 per month. 

Auto

Nearly every state requires drivers to have auto insurance. There are various types of required auto insurance coverage, and states have different minimum requirements. This shows the minimums, the kind of coverage you are legally required to have. Depending on your needs, you may want to purchase additional coverage. 

Unfortunately, car insurance for international students is expensive. Young drivers and those with limited or no credit history pay higher premiums. Some companies offer discounts to students with high GPAs and safe driving records. Many companies sell auto insurance policies which means there is a lot of competition for customers. Be sure to shop around for the best rate. 

Driving

To get auto insurance, you must have a driving permit. International students can apply for a state-issued license, but you can also drive legally using an international driver’s permit. To be approved, you must have been a licensed driver in your home country for at least six months. You can buy an international driver’s permit from the American Automobile Association or American Automobile Touring Alliance. That permit is valid for one year and can be renewed. 

Working as an International Student

Tuition and living expenses can be costly for students. So earning income while studying -- either for essentials, savings or to support loved ones back home -- may be necessary or desirable.  The good news is that if you want to work as a student, it is possible. However, there are certain restrictions that apply to international students’ ability to work that you should be aware of.  

International students with F-1 and M-1 visas can work on-campus and in specified training programs. On-campus jobs must be “student oriented,” like working in the cafeteria, library, or student center. Students cannot work off-campus during their first academic year.

Students can work off-campus after their first year via programs specifically for international students like Optional Practical Training, Science, Technology, Engineering, and Mathematics, Optional Training Extension, and Curricular Practical Training. 

We recommend talking to your school’s international office before taking any employment opportunities to make sure you don’t run afoul of the employment restrictions that are attached to student visas.  

Don’t Forget About Taxes

Income is taxed in the U.S. and, unlike some countries, must be reported to the government every year regardless of how much you make.  

Every April, the federal government and most states require American citizens and international people living here temporarily or otherwise to file a tax return. This document shows the income earned in the previous year and determines if more taxes are owed or if you paid too much, in which case you may be eligible for a refund. 

International students must file a tax return each year they live in the U.S. if they earned income. For those who are not employed, you must file a federal form showing you did not make any income. 

There is an online service called Sprintax that is specifically built for non-residents to file the necessary tax forms. 

Financial Aid & Scholarships

Most international students are not eligible for federal financial aid, thought there are some exceptions. 

Private loans are available to international students and can be used to pay for school expenses. Unlike federal loans, these loans are made by a bank, credit union, or online lender. While they can carry higher interest rates and more restrictive repayment terms than their federal counterparts, they can be a good alternative for those who need to finance some or all of their school expenses.  Upwardli can help you compare available options and get pre-approved for various loan options without affecting your credit score.     

International students may also qualify for scholarships. The amount of money awarded varies widely, from tens of thousands of dollars to a few hundred. Some are awarded by universities and some by private entities. Scholarships are awarded for various reasons, including country of origin, financial need, merit, and minority status. This site lists some available scholarships and sites that allow international students to search for scholarships they may be eligible for. Every penny of scholarship money is money you don’t have to pay out of pocket or borrow, so it’s worth researching. 

Upwardli is Here to Help! 

You’ll find many differences between your new home and the home you left -- the financial system is just one of them. But one thing both places have in common, no matter where you come from, is that there are good people who want to help you. Whatever problem you might have in your newly adopted home, there are people willing to help and who want to see you succeed. Upwardli is among those people! 

Upwardli expertly match members with strategies and personalized product recommendations designed to help them make smart financial moves. Whether picking the right bank, credit card or building credit quickly and safely, we use technology to eliminate the guesswork and make the complex simple.