Some bank customers with a troubled financial history may find themselves unable to open a new checking account, and this often comes as a surprise. Though a negative checking account history can haunt a bank customer for up to five years, applicants can explore a number of options to obtain a new checking account.
Just as financial institutions typically report debt and credit performance to major credit bureaus, banks also report customers’ checking account history to a major banking database like ChexSystems. A bank may report a customer who closes an account while it has a negative balance, fails to repay outstanding fees, writes checks against a closed account or takes other actions that the bank deems irresponsible or fraudulent. Once a bank makes such a report, ChexSystems creates a record for the account holder and reports the transgressions for up to five years, according to the official ChexSystems website. During that time, the account holder may be unable to obtain a new checking account.
Reason for Decline
When a new customer applies for a checking account, according to the banking advice website ChexSystems Help, the bank typically checks the applicant’s banking history. If this investigation turns up a record of fraudulent use, chronic overdrafts or other undesirable behaviors, the financial institution may choose not to accept the application for a new account. In many cases, according to the official ChexSystems website, the bank must tell the applicant why it declined the application and how the applicant can contact the reporting agency.
Though many banks will not open a new checking account for a customer who has a ChexSystems file, some banks do not subscribe to the ChexSystems database. According to the financial advice website Bad Credit Checking, a financial institution must maintain a relationship and pay a fee to verify a new account applicant’s history with ChexSystems, and some banks choose not to perform this verification. As a result, applicants with a troubled financial past may be able to obtain a new checking account by applying at a bank that does not rely on the ChexSystems database.
Banking customers with a checking account can take a number of steps to avoid a negative account record, according to the official ChexSystems website. Before customers close a checking account, ChexSystems recommend that they stop any automatic debits and allow any outstanding checks to clear. The organization also recommends that checking account holders close the account only when it has a positive balance, not when the balance is at or below zero. Checking users should exercise caution when co-signing for other account applicants, and should safeguard their ATM personal identification number, or PIN. Finally, customers with an active checking account should immediately report any errors to the financial institution.