About ChexSystems
If you've ever written a check at a retail store, chances are you've encountered ChexSystems. ChexSystems is a national database designed to help retailers and banks keep track of people that have mishandled bank accounts. Most retails stores use ChexSystems to approve checks, but many consumers remain uninformed about it.
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Function
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ChexSystems is designed to allow banks to share information about consumers with each other and with retailers. Customers that have continually overdrawn their checking accounts or had accounts closed due to mismanagement may find their names in the ChexSystems database. This database allows banks and retailers to make an informed decision about accepting a check or allowing a customer to open a new bank account.
Benefits
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For banks and retailers, the benefit of using ChexSystems is the reduced risk of establishing a bank account that is continually in the red or accepting a check without sufficient funds to back it up. For consumers, ChexSystems can help keep prices lower. Mismanaged accounts and overdrafts are expensive to banks and retailers. Many retailers pass on the costs of overdrafts to customers in the form of higher prices.
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Misconceptions
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The biggest misconception about ChexSystems is that ChexSystems makes the decision to deny or accept a check. ChexSystems does not authorize a check or a new account. ChexSystems maintains a file for each customer with a banking history and shares the information in the file with the retailer or financial institution. It is then up to the store or bank to make a final decision based on that information.
Warning
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It is extremely difficult to remove negative information from the ChexSystem. Paying off a bad debt or closing a problem account will not remove the negative information. Negative information stays in the database for up to five years. It is important to effectively manage a bank account in order to maintain a clean ChexSystems file.
Significance
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A negative report in the ChexSystems database can prevent you from opening a new account at most banks. If you do have an account, many retailers choose not to accept the checks of a customer with a negative ChexSystems report. Some employers also review ChexSystems reports before making job offers to new applicants.
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