A lot of business happens in the USA. As the largest economy in the world, this comes as no surprise. If you work with US businesses, chances are, they would want to pay you through local methods. Some businesses might be setup to use Paypal or International Wire Transfers, but the former is a pain to deal with and the latter can be expensive.
I work with some US businesses that pay through checks or ACH transfers (eg. Amazon Associates). ACH only works for banks within the US. Checks can be cashed internationally through your bank but the speed and reliability is notoriously poor. Sometimes it takes over 60 days and costs anywhere between $15 to $50. Then there is the risk that your check gets lost in the mail.
In these types of situations, it makes a lot of sense to have a US bank account for receiving payments. Unfortunately, post 9/11, due to a huge increase in anti-terrorism financing and anti-money laundering laws, it has become very difficult to open bank accounts in countries where you are non-resident. This includes the US.
Although it is possible to remotely open a bank account in the US through a strong banking relationship (example: you already bank with HSBC or Citibank elsewhere and are willing to place a $50,000 deposit with them in the US), this is mostly out of reach for small businesses or people who want a bank account there for smaller transactions.
The only way to open a US bank account in this situation is to do it in person while visiting the US. And even then, several banks will refuse and the ones which do agree, will be a little hit or miss.
You could potentially open a bank account remotely by incorporating a company in the US and then opening a business bank account but this would be very complicated in terms of tax filing requirements, legal fees, renewals, etc.
All these restrictions are mostly because of legal reasons but being able to verify a person face-to-face makes opening a bank account much easier. Still, opening a bank account without a valid Social Security Number (SSN) can be quite a challenge.
I had spoken to Citibank earlier about opening an account with them but they said I would need to have an average balance of $50,000 with them! Well, that ain’t happening!!
I visited Chase, Santander, Popular Community Bank, and Capital One on my last trip to New York City. Santander and Capital One agreed to open a bank account for me whereas Chase and Popular Community Bank flatly refused. They said that it is impossible for them to open an account without an SSN. It is fully legal to open a bank account without an SSN, but policies vary from bank to bank.
Eventually, I decided to go with Capital One because they said that they would give me a temporary debit card (Mastercard) immediately so that I would have access to my initial deposit and also the balance maintenance requirements were lower. Santander needed a $750 average daily balance whereas Capital One needed just $300.
Capital One Bank in Brooklyn
So, armed with my passport and a copy of my address proof (a telephone bill from India), I went to Capital One. The initial deposit required was $50. At this point, it is important to mention that their software system is really not setup to accept foreign addresses. Even though the rep chose “Foreign Individual” as the account category, the system would not accept a foreign address. (it wanted a US address) I also filled a W8-BEN form with my foreign address details to let the US IRS know that I do not live in the US.
Eventually, she ended up typing in my foreign address with Brooklyn and a New York zip code at the end of it. Then, she sent an email to the back office asking them to fix the address on their end. At this point I was worried that this would never happen and she’ll eventually tell me that they could not open an account for me.
But the back office updated the address and it was all good! Finally it was time to activate my online banking access so that I could monitor the account from overseas. When the rep tried to register me, the activation system would not work without an SSN. She informed me that I would not be able to use online banking and I would need to do everything over the phone. She also confirmed this with the back office. I was dismayed!
I later found out through a friend that there is apparently a work around to this. The gist of it is that if you do not have an SSN, you can still register for Capital One online banking by entering 9 9′s. So: 999999999 will help you get registered for online banking! I decided to try it on their website and sure enough, it worked perfectly! I suppose the software developers put this in for people who do not have an SSN (there are many such people, including many US residents, new international students for example) but they forgot to document this “feature”.
I was finally fully setup with my new US bank account, all in the space of a Friday afternoon in New York City. Here is what I got:
- A welcome pack with details of charges, terms, etc.
- 3 free checks to use if I want to pay someone
- A temporary Mastercard debit card which I can use immediately (the permanent one will be mailed out to my foreign address)
- Online banking access
- $50 that I deposited were available in my bank account (I tried using my debit card later and it worked)
All I needed to open the account was:
- A visit to the US (this is perhaps the hardest part for most people)
- My original passport and visa (they will take copies at the bank)
- Copy of my address proof from back home (any one of these: utility bill, bank statement, credit card statement)
- $50 in cash to place a deposit
- A US telephone number (this is not absolutely necessary but I use Google Voice to forward calls and I believe it will make things easier in case the bank needs to contact me)
I now have two months to bring my account balance up to the $300 minimum otherwise I will get charged maintenance fees on my account.
The permanent debit card took a while to show up. I believe they had mailed it to the incorrect ‘Brooklyn’ address that the rep had entered while creating my account. I waited for a month, and then, when the card didn’t show up, I had to call them up and request for another debit card. It took another month but two months after opening my account, the permanent debit card was finally delivered at my address in New Delhi. This wasn’t super important because all this while, I could flawlessly use my temporary debit card (which had been issued on the spot). The only reason I needed a permanent debit card was because the temp one didn’t have my name on it (It just said Capital One Customer) and it also didn’t have a cute golden retriever motif that I got to choose!
Cute Capital One debit card
Finally I can work with US companies that aren’t necessarily setup to do business internationally! I can ask them to pay me via check or ACH. ACH payments clear within two business days so it’s great to see the money safely in my bank account. I can also withdraw the money via my debit card or just swipe it at establishments when buying stuff.
How to get a US billing address on your debit card
After a few months, while traveling in the US, I wanted to use my debit card online. Unfortunately, my debit card was associated with my foreign address and a lot of US websites (Hulu, T-mobile, etc.) would not accept my debit card with a foreign address. The solution was pretty simple. I got in touch with Capital One through their online chat (you get this after you are logged into your online banking) and asked them if I could attach a US address to my debit card but keep my physical mailing address the same. The agent told me that they could attach a ‘temporary US address’ to my debit card for up to one year. All I needed to do was provide them with the address through the online chat. It took five minutes and my debit card now has a temporary US address (I gave a close friend’s address) attached to it. My mailing/physical address did not change and I can now use my debit card online with a US billing address for one year. The agent said that if I want to renew the ‘temporary address’ after a year, I just had to call them or talk to them online and update it once more. Pretty simple! Time for some Hulu!
How to withdraw internationally from your US bank account
The easiest way to do international withdrawals is to use your debit card. But there are fees associated with this. Capital One will usually charge $2 plus almost a 3% currency conversion fee. That’s convenient, but expensive. The Capital One account does not let me carry out international wires through the online banking system. It also won’t let me do outbound ACH transfers to another US account. This is presumably because I haven’t provided a US SSN.
There is a way around this and one that actually results in significant savings! TransferWise is a service that you can use to transfer money internationally at better exchange rates than what banks offer. Their exchange fees are about 0.9% which is a lot less than most banks will charge you. TransferWise can do an ACH Pull from your account and they support a large number of currencies I’ve tried transfers to EUR and INR and both were credited in one business day to the destination bank account and with a fair mid market exchange rate!
Using this method, you save around $35 on a USD 1000 transfer and almost $300 on a USD 10,000 transfer.
If you have questions, please feel free to ask in the comments!