Whether we like to admit it or not, it’s really difficult to function in today’s society without a checking account. If you don’t have a checking account, you won’t be able to book most hotel rooms or pay your bills online. You won’t have a debit card or checks to pay for items such as groceries and will have to carry a fairly large wad of cash with you at almost all times. You may have to buy cashier’s checks or money orders to pay bills. In short, not having a checking account can be a real inconvenience.
Why are people denied?
If you’ve applied for a checking account and have been denied, you may be wondering why. For most people, it’s because they’ve been flagged as high risk by a huge database of consumer banking behaviors that is operated by the little-known company ChexSystems.
I saw a report recently that about 80% of US banks rely on information from this database to screen people when they apply for bank account. I also read that negative information on a person apparently stays in the ChexSystems’ database for five years.
The number one reason why people are denied a checking account is because they behaved badly with a previous account. If you bounced checks, even if you paid overdraft fees, and the bank closed the account, this will follow you for five years. People in this situation may find that it costs $3 or $4 every time they cash a check. They can have a problem opening a joint checking account with a partner or spouse because they are in ChexSystems.
People who are the victim of identity theft can also find it hard to open a checking account. If an identity thief drains your accounts this will cause them to go negative and you could be charged numerous fees. You might feel as if you were being treated as a criminal even though the money was stolen from you under the bank’s watch. It may insist that you owe them money and, if so, may report this to ChexSystems.
People can also be denied a checking account because they had left a previous account overdrawn. If you left an account overdrawn by as little as $100 and the bank closed the account and reported this to ChexSystems, you might find that no other bank would be willing to give you a checking account.
If a bank account was raided
I have read stories of people who were in a consolidated payment plan and failed to make a monthly payment. One of the companies in the plan decided they were no longer qualified for the plan and insisted they must now pay everything owed in one lump sum. When people were unable to do this, the company legally raided their checking accounts and took whatever funds were there. This caused the accounts to become overdrawn and fees were charged. If people were unable to pay these fees, it was reported to ChexSystems, which made it impossible for them to get new checking accounts.
What to do
If you were denied a checking account, your first option would be to negotiate with the bank where you had problems and try to settle what you owe it. You might also contact ChexSystems to see if you could negotiate with it to get your problem settled. If you pay the bank whatever you owe, it might offer you a “second chance” checking account. You can also check with your local credit union or visit the NCUA for a recommendation.
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