Immigrants Baffled by US Debt Culture

First-generation American, Herman Hernandez, owner of a toy store in Greenpoint, Brooklyn, feels his family’s spending habits have helped him live the American dream. (Photo by Natalia V. Osipova)

In the United States, debt culture is so ingrained that some teenagers get credit cards even before they learn how to drive.

That’s very different to how Luis Salgado, a 19-year-old design student living in the Bronx, was brought up.  Salgado, whose family immigrated to the U.S. from Mexico over 20 years ago, said his “hardworking” parents never had bank accounts, always paid their rent on time, and although they could qualify, never wanted a debit or credit card.

“No credit. Nothing like that,” Salgado said. “It has always been cash.”

Many immigrants don’t trust credit and tend to be better savers and more disciplined with their finances than Americans in general, especially in the first years of their life in the U.S. While these habits have helped them steer clear of the foreclosure crisis and the financial troubles that many Americans faced in recent years, it also has a downside, leaving some immigrants “underbanked” and unable to establish a credit history when they apply for mortgages or to rent homes.

With interest rates at record lows, government officials hope to stimulate the U.S. economy by encouraging people to borrow money and make large purchases, such as houses, cars or electronics. But no matter how low the rates go, many immigrants are unlikely to take on debt, say many financial advisors and immigrants themselves.

Still, these instincts can help immigrants climb the economic ladder. Immigrants have slightly lower poverty rates than U.S.-born New Yorkers, a Fiscal Policy Institute analysis of the U.S. Census Bureau’s 2005-2007 American Community Survey shows. The 10 neighborhoods with the highest concentration of foreign-born residents had stronger economic growth than the rest of New York City between 2000 and 2007, according to a report from the Office of the New York State Comptroller. And the number of immigrants who owned homes doubled between 1991 and 2008, and increased by almost 50 percent between 1999 and 2008, the same report found.

Many immigrants don’t have credit cards and therefore tend to pay for everything with cash, said Lauren Lyons Cole, a certified financial planner.

“Living just on cash, you tend to have a chunk of it on your savings account, like a cushion to make sure that you don’t run out of money,” said Cole, who works with clients from South America, Germany, Latvia, Russia, China, Taiwan and some Caribbean countries. “That’s a great jumping-off point for saving money, so that you can save more and more.”

Cole offered as an example a Japanese woman who came to the U.S. to study in college. She didn’t build any credit card debt, and when she started working as a teacher she continued to live within her means. Unlike Americans, who save on average 5 percent of their income, Cole said, she saved 20 to 30 percent — enough money to buy a property by the age of 30.

“In my experience, immigrants and first-generation children tend to accumulate wealth much more quickly than those of us with families who have been in the U.S. longer,” she said.

Cole explained that immigrants are willing to put up with a lower standard of living than debt-ridden Americans in order to reach their saving goals. “I am often impressed by people who are able to save 25 percent, or like 30 percent or a third of their income,” said Cole. “And I think I tend to see those kinds of saving rates more likely in immigrants.” And, she added, “They are more likely to be entrepreneurs and take risks.”

The United States Small Business Administration found that immigrants in the United States are nearly 30 percent more likely to start a business than are non-immigrants.

Mark Nagawiecki, a 60-year-old entrepreneur of Polish-Ukrainian descent, immigrated at the age of 36, and started his business two years later. As president of a real estate company in Brooklyn, he said, he has seen that Polish and the Ukrainian immigrants avoid bank loans, preferring to borrow from within the community and stow their money “under a pillow” in Eastern-European tradition.

When Nagawiecki needs money, he would rather borrow from his friends than from a bank. “I ask my friend to lend me $25,000, and the next day he brings me them in cash,” he said.

“It’s a mentality,” he said. “Old generation of Polish immigrants don’t believe in credit.”

Chris Dlugozima, a certified consumer credit counselor at the nonprofit GreenPath Debt Solutions, said saving money in cash is typical for immigrants coming from countries where banks have failed and people have lost their money.

That’s why “under the pillow” for them feels like a more secure place than a bank account, which is not necessarily applicable to the U.S. banking system. Dlugozima explained that in the U.S., as long as the bank account is insured by the Federal Deposit Insurance Corporation (FDIC) the first $250,000 are “safe and sound,” even if the bank fails.

“But when you store money in a house under mattresses or something like that,” he said, “if you lose it or it gets stolen — that’s it.”

Some immigrants find that their first encounter with the American credit system is a negative experience. Bilyana Tosic-Petino, a Yugoslavian immigrant, said she took a $10,000 loan to start a business making hand-made jewelry, soon after she arrived in the U.S. 13 years ago.

But Tosic-Petino, 40, didn’t understand how the local market worked, and for a long time kept investing borrowed money in a store that had no sales.

“Money is a wonderful thing, but it can overpower you,” she said. It took her four years to pay back her loans. Six years ago, she started a new Brooklyn-based jewelry company, Falcon Feather, that is still in business, but she said she remains cautious about borrowing.

Contrary to many immigrants’ expectations, however, eschewing debt entirely can limit their ability to prosper in the U.S. Not having debt or credit doesn’t mean you have good credit, said Kristen Euretig, a certified financial planner. Euretig works for the Brooklyn Cooperative Federal Credit Union, where she teaches Personal Finance classes in English and Spanish.

While people say “my credit is clean, I don’t have anything,” most American landlords would see no credit history as bad credit, she said. Credit history serves as proof that a person can pay his or her bills on time; if a client cannot show that on paper, a landlord has reason to doubt their ability to pay the rent.

Bad credit, at the same time, invites a lot of misconceptions.  One young client, Euretig said, thought he had bad credit because he was always denied loans when he applied.

“The issue was he just had never established credit,” she said.

For first-generation Americans, learning how to navigate the credit system can be a challenge when their parents urge them to avoid all debt. Herman Hernandez, 48, the owner of the Greenpoint Toy Center, said that his parents, who moved here from Puerto Rico, didn’t have any debt and taught him to “live within your means.”

“If you make a dollar, you have to spend 50 cents and save 50 cents,” Hernandez said. “That’s what I believe in.”

In his mid-20s, Hernandez took on his first loan to buy a car, and a few years later he took out a mortgage. Since his family had no experience with credit, he learned debt-management on his own, ensuring that his credit score stayed above 700.

To buy his business eight years ago, Hernandez tapped into the equity on his house, and paid off the loan in five years. His foray into the American credit system has paid off, Hernandez said.

“Compared to what my parents had, I have two cars, a house, and provide more for my children,” he said. “To some extent, I am living an American dream.”

But Euretig said that Hernandez’s positive experience with debt is an exception rather than the rule. In her practice, she has seen first-generation Americans go to one of two extremes. Some avoid debt altogether and end up “unbanked or underbanked,” she said. “The other extreme is learning from their American peer group to over-extend and go overboard in debt.”

[Editor’s Note: This story has been updated to clarify Lauren Lyons Cole comments and quotes.]



  1. Pingback: Designing a More Sustainable & Green Business by Looking at Immigrant Culture

  2. Hello Natalia,

    I found it very interesting that immigrants felt this way about American’s reliance on debt, and it doesn’t surprise me in the least. I also believe that we need to eradicate this “debt culture” that has been created in America and we need to work to using credit as an effective too, instead of how we currently use it.

    Would you interested in reading my bog post at I would enjoy hearing from you.

    Spencer Macklin
    The Green Room at Iowa State University

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  4. 110KentResident says:

    Apparently not only does Mark Nagawiecki not believe in banking and credit with institutions over borrowing from friends and stowing money “under his pillow”, but he also believes in cheating his tenants out of rightful amenities and security deposit returns. His “real estate” business was built on the backs of me and my friends, my fellow tenants of 110 Kent Avenue who lived there from 2003-2009, despite it not being zoned for residential use. Even Mark Nagawiecki Sr.’s brother and his wife and young children were living there. We were all promised kitchenettes that were never created. We discovered Mark was not paying our Con Edison bill even though we were paying him, so the building was largely cold in the winters. And he never returned many of our security deposits (at least 6 of us were cheated out upon moving out). I was a witness at court for another tenant to try to get hers back and she was awarded its return, which of course was never adhered to. Mark Sr. is what New Yorkers call a slumlord. He cheats people and threatens them with wrongful evictions. The “office spaces” that were once our apts have crappy construction with really rough flooring with holes, old electrical wiring, and drafty windows. My friends and fellow tenants and I stuck together to rise up for our rights and were subsequently evicted. Nagawiecki’s life was sadly built on the backs of those of us Williamsburg artists who merely needed a good, cheap place to live and were taken advantage of at every turn.

  5. 110KentResident says:

    110 Kent Avenue
    Owner: 110 Kent LLC, run by Mark Nagawiecki
    Although this edifice didn’t fall under the city’s rezoning purview — the three-story, 85-year-old building is slated for industrial use — that apparently didn’t stop the owner from going residential. A former resident told The Real Deal that he — and many other tenants — have lived there recently, and the building’s record with the Department of Buildings confirms as much. The building has received seven Environmental Control Board violations since 2000; six of these violations are still open. The infractions center on the residential transformation, including illegal plumbing work that created apartment bathrooms and occupancy contrary to the certificate of occupancy. The phone number for 110 Kent LLC has been disconnected.

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