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Banks & Taxes in the US
Payment Methods in the US
What payment methods are used most frequently in the US? Do Americans really still write checks on a regular basis? When can you use credit cards? Read our guide on making payments in the US for information on using cash, credit cards, debit cards, and checks.
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The US dollar is the official currency of the United States. Paper bills are all the same size, and come in USD 1, 5, 10, 20, 50, and 100 denominations. There are four main types of coins, which each have their own name: penny (1¢), nickel (5¢), dime (10¢), and quarter (25¢). There are also 50¢ and USD 1 coins, as well as USD 2 bills, but these are rare and are treated more as collector’s items than as money that is in everyday circulation. As you will see below, however, the US is largely a cashless society, and you will rarely need to use cash unless you prefer this payment method.
A Cashless Society
Credit cards are king in the US, and are used for just about everything. They are accepted almost everywhere, and are used for all types of purchases, no matter how small the amount. Some stores do require you to spend at least a certain amount to use a credit card, but this is the exception, not the rule.
If you are using a foreign credit card while you are in the US, be sure to check what fees you will be charged in advance, and what exchange rate will be used. If your credit card has a PIN number associated with it, you can also usually use it to withdraw money from an ATM. It is important to check what fees you will be charged, both by the bank in your home country and the one in the US.
Applying for a Credit Card
You can apply for a US credit card through your bank. In addition, many stores and companies offer their own credit cards. If you use a store credit card, you will often get special deals and discounts. It is generally quite easy to get a US credit card, although new restrictions are in place since the recent financial crisis, featuring tighter credit lines and new consumer protections.
When choosing a credit card, be sure you understand all the fees associated with it. Are there monthly fees or an annual fee? Other “hidden” fees can include swipe fees, finance charges, and fees when you go over your credit limit. What is the grace period before you have to start paying interest on your purchases? Is there a rewards program associated with the credit card, through which you can earn points towards flights and hotel stays, as well as gift certificates for your favorite stores? The Federal Reserve Board has important information on choosing a credit card and understanding credit protection laws.
Making Credit Card Purchases
If your credit card does not come equipped with a PIN, then you will not be able to use it for ATM withdrawals, and you will have to sign for your purchases. For purchases below a certain amount (usually around USD 25 or USD 50), however, it is becoming increasingly common to just swipe your card to make a purchase, and not have to enter a PIN code or sign a receipt.
Despite the new, stricter measures, Americans still have a tendency to max out their credit cards and spend beyond their means. Be careful not to follow this bad example and go into debt during your time in the US. If your bank offers the option, you can sign up to have your credit card bill automatically deducted from your account each month.
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Debit cards are also widely used in the US, although they are less popular than credit cards, as they afford less consumer protection if they are lost or stolen. Debit cards are linked to a checking account, and money is deducted from this account almost immediately when the card is used. You will usually have the option of signing up for a debit card when you open a new checking account. Your debit card will come with a PIN, which you can use to withdraw money from an ATM or make purchases in stores.
When you use your debit card to pay for your purchases in many major stores, you will be asked if you would like “cash back”. If you select this option, you can then choose an amount, usually in denominations of USD 20, which the cashier will hand to you in cash. This amount will then be added to the total amount charged to your card. This is a possible way to avoid ATM fees or at least save you a trip to the bank.
Unlike in many other countries, checks are still commonly used for some transactions in the US. Although Americans are increasingly using online methods such as direct debit or standing orders to pay bills, some companies charge fees for this service, making writing a check the most attractive option. Many housing complexes and landlords still only accept checks to pay the rent.
Checks are also still in common use to make payments to individuals, such as for monetary gifts or when you owe someone money. Online money transfers are increasing in popularity for payments between individuals as well as between individuals and businesses, however many banks still charge a small fee for this, as well. As online payments become more popular and fees are waived, the use of personal checks can be expected to continue to decline in the US.