You have a lot of options when it comes to how to manage and spend your money. In this post, I will talk about some of the main options people use. There are other options and I encourage you to look into these options yourself to decide what’s right for you.
Part 1: Ways to store your money
National banks
Examples:
- Chase
- Wells Fargo
Pros:
- Available anywhere in the United States
- Generally good websites and apps
- Physical buildings you can visit all over the US
Cons:
- Generally higher fees
- Generally lower interest rates
- ATMs not administered by the bank charge a fee
An interest rate is where a financial institution gives you money for keeping money in your account with them.
A note about Wells Fargo: Wells Fargo has recently been the subject of a public scandal. In 2016, bankers were directed to open extra accounts without customer consent. This is “identity fraud,” and the authorities were not happy with them about it. There were reports that bankers disproportionately targeted those whose first language was not English, and who would therefore have a more difficult time catching the fraudulent activity.
But let me be clear: your banking choices are yours alone. There is no evidence such fraudulent activity will continue in the future. It is your right to be familiar with the history there. More on that story can be found online:
Online banks
Examples:
- Ally
- Charles Schwab
Pros:
- Generally lower fees
- Generally higher interest rates
- Generally excellent online access, apps, and phone access
- They generally reimburse ATM fees
Cons:
- No physical building you can visit
- It might be difficult or impossible to deposit cash
Credit unions
Examples:
- California SunTrust
- Schools First
Pros:
- Governed by community members
- Not focused on profits
- Fees are generally low
- Interest rates are generally high
- Physical buildings are available near UC Irvine
Cons:
- Generally more localized
- One might have some difficulties with websites and apps
Part 2: Ways to move your money
Checks
These are little forms provided by financial institutions for moving money within the United States.
Pros:
- Standard, well-accepted means of making large payments
- More secure than a wire transfer or money order
- Funds do not leave your possession until the form is received
Cons:
- Cumbersome to write and manage
- It can be challenging to keep a piece of paper secure
- It can cost you money to order checks
Money Orders and Wire Transfers
These are little forms provided by private companies like MoneyGram for moving money internationally
Pros:
- Standard, well-accepted means of making large payments
Cons:
- Virtually no protections for you, the payer
- You pay up-front, usually in cash
- If the form is lost, or if the funds are transferred to the wrong party, it can be impossible to recover your money
Personal Transfer Apps
Venmo and PayPal are apps for moving money between private individuals (regular people).
Pros:
- Convenient apps, cash-free
- Generally free to use
Cons:
- Avoid using words related to countries under US embargo (eg, writing “Syrian food” in a memo might result in a payment being delayed, since “Syria” will be picked up for company review)
- Some apps have poor privacy defaults, and make your transactions visible to many people for no clear reason. Make sure you go into the Settings and choose what’s right for you.
Cell Phone Apps
Unlike in China, where cell phone apps have become a standard way to pay, services like Apple Pay, Android Pay, and Samsung Pay have been slow to catch on. Many, but not all, places accept these payments.
Pros:
- Presumably convenient to use once set up
Cons:
- Not accepted ubiquitously
Online Payment Services
The United States has an Automated Clearing House (ACH) that is free for financial institutions to use. This infrastructure makes it possible for online services to transfer money between financial institutions, just like a check. For example, ZotPay and UCI’s Direct Deposit use this kind of system to receive payments from you and to send them to you once you are in the United States.
Pros:
- Generally convenient and secure
Cons:
- Many website are poorly designed and difficult to use
Debit Cards
These are plastic cards that allow you to write virtual checks in stores, just by swiping your card. You can also use them to withdraw cash from ATMs—but often with a fee.
Pros: Convenient to use to pay for things in stores and free to use
Cons: Fewer protections than credit cards if funds are inappropriately transferred (eg, if card is stolen)
Credit Cards
These are plastic cards that look a lot like debit cards, but they are fundamentally different! They allow you to promise stores and websites money, which you pay back later by transferring money from your personal account to the credit card company.
Examples: Discover, Visa and American Express cards. Discover is generally the most willing to work with those without established credit histories, but check with the others. In my experience, Visa is generally the most widely accepted, and American Express offers the most customer protections and benefits.
Who offers credit cards?
- Credit card companies themselves (Discover, Visa, Amex)
- Financial institutions (banks, credit unions)
- Private sellers (Amazon, Macy’s)
Pros:
- Convenient
- Nearly all give you money for spending money (e.g., 1 or 2 pennies for every dollar you spend)
- More protections than other forms of payment
- You can dispute fraudulent transactions
- You can often recover money if improperly transferred
- You can pay later, meaning you have more money for more time
Cons:
- Not all stores accept credit
- Not all credit cards are accepted everywhere
- If you are late on a credit card payment, the company may charge you a lot of money
A note for credit cards: Excessive use of credit that people and institutions could not pay back played a role in the 2009 financial recession. Be wary of offers to open unnecessary lines of credit. Generally, the advice is to have one or two general lines of credit that offer benefits at many shopping places. If you have two from two different companies, you have a backup card. In the case that one credit card becomes temporarily unusable because someone stole your credit card number, you have another one to use.
Cash
Can’t forget cash! Bills and coins are still in use today.
Pros:
- Accepted at nearly all stores
- Transactions are private; stores often use card numbers to track what you spend, but this is nearly impossible for them when you use cash
Cons:
- No tracking means it can be difficult to recover money if used improperly
- Unlike in many countries, US coins do not clearly state their worth in large numerals or by using size
Disclaimer
This blog post is provided for purely informational purposes only. The author(s) encourage you to do your own research, and do not encourage or dissuade you from a relationship with any financial institution. This post is not an endorsement or denouncement of any financial institution. This blog post does not constitute financial advice, and it should not be understood as constituting financial advice. Your finances are your personal responsibility. For financial advice, consult a professional. The statements herein do not represent the views of any legal entity, including the University of California, Graduate Division, or the author(s) of the post.
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Mustafa HussainHome Country: U.S.Donald Bren School of Informatics and Computer Sciences
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