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Banking and Personal Finances in the USA

For expats moving to the USA, getting your finances in a good state of affairs early will help to smooth the transition of moving to the USA, and could save you a considerable amount of money.

Banking, Taxes and Finances in the USA

Currency

The US dollar is probably the most well-recognised currency in the world, but the notes can be confusing at first, especially for those of us used to differences in colour and size to help distinguish a note’s value.

US dollar bills (notes) are all the same size and similar in colour and design, so if you are paying in cash, check your change carefully. Cashiers will frown if you pay them only in pennies, however.

Taxes

Working in the USA

You obviously must hold the correct US work permits or visas, professional licences, and qualifications in order to be employed or run a business in the USA. You’ll also need to register with the appropriate federal, state and county authorities and tax collectors.

Typically, American companies pay staff every two weeks by direct deposit or check.

If you have income originating in the USA, whether from employment, investments or business interests, you will need to file a US tax return. You will need to determine your status – either resident alien or non-resident alien – and complete and submit the appropriate form annually.

Local sales tax

Depending where in the USA you are, you may find another supplement on your bill: local sales tax. Its cost varies by state and, often, by county, but it can be as much as 10% so be prepared; this can be significant on larger items.

Setting up a bank account

Setting up a local checking (current) account will save you from paying the excessive withdrawal fees levied when using your international bank card overseas. You will definitely need one if you are working, setting up a business or claiming a UK State pension while in the USA. For the most part, you will have to have a Social Security Number (SNN), similar to a UK National Insurance Number (NIN)

Although internet banking is widely available, it is worth using a bank with a local branch, since your banking requirements may be a little more complex than the average US bank customer. You will probably find yourself spoilt for choice since there are many small local banks in the USA.

Choosing a bank

While choosing a local bank might seem attractive, be aware that this will limit your free access to your money. ATM charges for withdrawals from non-partnered banks can add up. If you value flexibility, or intend to travel, you might find it better to select one of the major national banks, such as Bank of America, Chase, Citibank, or Wells Fargo or international banks such as HSBC or Santander.

You will need your passport and visa plus written documentation that proves you are living and/or working in the area, plus funds to cover the minimum opening balance of your chosen account.

Do shop around: some accounts will charge you a monthly fee; some won’t, especially if you are keeping a minimum credit balance in the account.

Do be prepared to pay on a transaction basis for some items: you’ll need to pay for your checks (cheque book), and again when you use them, plus withdrawal fees on some ATMs.

Savings accounts

It’s rare to accrue interest on a checking account so, depending on how much money you plan to hold in US accounts, you may wish to open a savings account as well. Ideally, do this with the same bank you hold your checking account with and make sure it is FDIC insured.

Transferring money to the US

If you need to transfer money quickly, the traditional approach has been to use money transfer agencies. Provided you use an authorised money transfer company this is a secure route, but there are cheaper ways to transfer funds.

For small, irregular amounts PayPal is a good option. For larger amounts, TransferWise or FairFX offer very competitive rates.

For regular payments, setting up a US bank account will pay off, especially if you’re transferring funds between your own UK and US accounts on a regular basis (e.g. direct debit). Bear in mind that you need to compare the cost of currency exchange / exchange rates as well as transfer fees.

Accessing UK pension in the US

The USA is one of the easier countries in which to claim a UK state pension. You’ll need to let HMRC know that you are moving or retiring abroad, complete an international claim form and provide the IBAN and BIC numbers of your US bank account.

Claiming private pensions in the USA is more complicated. It may have tax implications and you may face financial penalties. Check with your provider and HMRC.

If you’re not at pension age just yet, it is worth getting a pension statement from HMRC to see whether you need to continue to pay voluntary contributions while you are living in the USA. If you’re working and paying tax in the USA, then these years can contribute to your entitlement – again, check with HMRC.