While pretty much any one with a US address can open a savings account, only individuals or couples who are not listed on the ChexSystems can open a checking account with the majority of banking institutions. This can be extremely difficult for people who may have had financial troubles in the past, as it severely limits where they can open a checking account, and the types of checking account features they would qualify for.
ChexSystems is a service run by the same group that handles US citizens' FICO credit scores. If you should get listed on ChexSystems, that's a notation that can haunt you and your financial abilities for five full years!
What Gets Reported to ChexSystems?
The most troublesome aspect of the ChexSystems situation is that you can get reported if your account is closed for “cause” - but yet there is no concrete definition for what “cause” might be. Banks seem to have different policies as to what reasons are valid for closing an account and reporting to ChexSystems, but some of the more common reasons include:
Debit card abuse
Insufficient funds the bank honored (some banks only give you a few days to pay it back before they immediately report it to ChexSystems)
ATM transactions over your available balance
Automatic payments from your account when you didn't have enough money to cover the withdrawal
Lying or otherwise falsifying information when opening your bank account
How a ChexSystem Report Effects You
Similar to a bankruptcy or charge off on your credit report, if your bank notifies ChexSystems of an incident with your current bank account, that notation remains on your ChexSystems report for a full five years from the date the incident is reported.
Five years is a long time to be punished for an overdraft! Hopefully banking institutions cut people a little slack for their first overdraft offense, or at least give them ample time to pay it back before reporting to ChexSystems, but there doesn't seem to be any guidelines for how many days an overdraft must be outstanding before it gets reported and your fate is basically in the hands of your banking institutions when it comes to your report on ChexSystems.
Most banks include a policy for people trying to open an account:
“We will not open a checking account for you if you have one or more incidents reported to ChexSystems”.
Check Your ChexSystem Record
Just as you are entitled to a free credit report annually from each of the major credit reporting bureaus, you can now access your ChexSystems report free, one time each year. To see if you've been reported to ChexSystems or to make sure there are no errors on your report, you can order yours here: Consumer Debit
If you've already found yourself a victim of the ChexSystems process and can't seem to open a checking account, there are a few banks that operate without checking these reports or will open a checking account for you despite having a record on ChexSystems.
Second Chance Checking accounts are available with a handful of banks across the country – and chances are as an increasing number of people are reported to ChexSystems, more banks may start offering Second Chance Checking accounts to fulfill the need for such a service. There are still requirements for qualifying for a Second Chance Checking account – primarily if you owe money to another bank, most will require you to pay it off before you can open a new account with their institution, and if you have been convicted of fraud, even a Second Chance Checking probably won't be able to help you.
Getting a ChexSystems Report Removed
Just as you can attempt to get errors removed from your credit report, if you have been reported in error to the ChexSystems database, you can send a letter and request verification of the record and removal if it cannot be verified.
Chex Systems, Inc.
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Fax: (602) 659-2197
Instructions can be heard by calling: (800) 428-9623