If you apply for a checking account at a bank and your request is denied, then you have probably been blacklisted on the ChexSystems national consumer report database. Do not take this personally because 7% of American households are in the same boat you are in. However, the real problem is that you applied for a checking account at a bank which uses ChexSystems to screen their new applicants. If you already know that you are blacklisted, you need to avoid all banks which use ChexSystems and find one that does not use it.
Believe it or not, about 20% of all national and local banks in towns and cities throughout the country do not use ChexSystems. You just have to know which ones they are. Once you find a Non-ChexSystems Bank, you won’t have the stress of wondering if your past mistakes with previous bank accounts will prevent you from ever opening another one again.
What You Need To Know About ChexSystems
Many consumers are familiar with credit bureaus and the basics of how they work in the United States. However, not as many know what ChexSystems is and how it works. About 80% of banks in the United States use ChexSystems, a consumer reporting agency (CRA) that tracks your checking and savings accounts at banks. ChexSystems monitors and inspects accounts for abuse to ensure good consumer activity, much like how credit reporting agencies report and monitor credit cards, loans, and other liabilities.
ChexSystems does not affect your credit report; however, it does impact your ability to take out any new checking or savings accounts. Institutions that use ChexSystems can all see the same information, and we’ll have more on that later. While it is important to have an excellent track record with ChexSystems, if you have had some hiccups along the way with your bank accounts, have no fear! We will review options for you.
There are similar Consumer Reporting Agencies to ChexSystems. The first is Telecheck. Basically, as the name might imply, Telecheck is a check verification system. Telecheck receives payments from financial institutions in order to use their system, and, in return, Telecheck guarantees the checks they verify.
The Early Warning System (EWS) is the newest system of these three. It was created by Chase Bank, Wachovia, Bank of America, BB&T, and Wells Fargo. Typically, bounced checks and overdrawn accounts are reported to the EWS. This isn’t utilized by many companies at this time, but as per the system creators’ names, large institutions are using it.
How ChexSystems Works
There are two main pieces of information that ChexSystems provides financial institutions: risk score and the actual report or “consumer disclosure”. Let’s explore the two components.
Score – ChexSystems takes a full picture of all marks, and issues a score between 100 to 899 (more on this below).
Report – This report will show unpaid fees mainly from overdrafts, checks bounced, and possible fraud. Credit inquiries and check orders can also be seen here (more on this below).
What Data is Inside ChexSystems?
Keep in mind that ChexSystems does not report to credit bureaus; they only keep tabs on any negative actions on your part. It doesn’t operate like the credit bureaus, which report the “good” deeds you are doing with your banking accounts. Instead, it solely reports the “bad.” The following is a summary of what negative information could wind up in your ChexSystems report:
Bounced checks or overdrafts
Unpaid negative balances
Involuntary account closure (e.g., bank closes your account, usually due to fraud or bad checks)
Suspected fraud or identity theft (e.g., check fraud, altering, or falsifying information)
Account, debit, or ATM abuse (e.g., bending any rules, trying to circumvent procedures)
Outstanding checks in SCAN database or returned checks (e.g., checks being handled by a collection agency or are fraudulent)
All the above negative marks are typically deleted after five years unless there is some sort of error that will provide the opportunity for you to create a dispute. Obviously, if you have any of the aforementioned bad marks, chances are you will know about them and it won’t be a surprise when sitting in the lobby waiting to open an account. Just like credit reports, errors do happen, so any of these could pop up for anyone.
The following marks are primarily for monitoring and are not necessarily negative in nature. However, when abused, they can possibly be negative:
Lost checks and debit cards
Check ordering last three years
Tax ID number (SSN) or driver’s license verification
Amount of bank accounts opened/applied in the last 90 days
These items above are typically removed from the report after five years. Inquiries into ChexSystems are removed after 90 days, or even three to five years. Inquiries may be by the consumer, other banks, employers, IRS, or any other government or permitted parties.
Everyone is familiar with the FICO score that credit bureaus use. ChexSystems uses a similar consumer score called the QualiFile consumer score. The range for this scoring system is from 100 to 899. Much like credit scores, the higher the number, the better. ChexSystems isn’t utilized solely for loans and credit cards; some banks use it as a deciding factor for checking and savings accounts. Typically, smaller banks and credit unions may utilize ChexSystems to decide on one’s credit.
Options When Declined for an Account
So, you are declined by a bank while trying to open an account, and you’re now wondering what you can do. Many people who approach a few banking institutions and are declined believe that no bank will take them and that there are no solutions. The problem with this logic is that the few banks they visited perhaps all use ChexSystems and examine the same data.
In order to get approved, you will have to look into your actual report and see what you may be able to remove. If there is nothing that can be removed, contact other banks that don’t use ChexSystems. In addition to Non-ChexSystems Banks, you can also visit banks that offer Second Chance Accounts, or prepaid options. We’ll have more on this later, but let’s start with removing negative items from your ChexSystems report.
Removing Items from ChexSystems
In the event you find yourself declined for an account, it is a good idea to request a copy of your ChexSystems report. You can obtain a copy once every 12 months. In the event you were declined and find out there is incorrect information on your report, you may be able to remove it. You can do so in several ways, and can start the process by obtaining a copy of the report.
Call ChexSystems at 1-800-428-9623
Visit their website at ChexSystems.com and fill out this form.
You can also print that form and mail it to:
Attn: Consumer Relations
7805 Hudson Rd, Suite 100
Woodbury, MN 55125
Next, you need to look for any errors on the report that you believe are inaccurate. Gather any documents, receipts, bank statements, or other documentation that indicate the correct information. Options to submit your dispute include:
By mail via the same address listed above for obtaining the report
On the phone by calling 1-800-513-7125
If everything is accurate on your ChexSystems report, then much like working with creditors with a credit report, you could talk to any banking institution or collection agency to remove marks or “clear” them from your report. They would agree to this in exchange for paying any debts owed.
The only other option if there are no errors and nothing more to pay would be to wait the typical time required for these various infractions to leave your report. In the meantime, you can look into alternative options with other banks. Let’s explore that next.
Difference Between Non-ChexSystems & Second Chance Accounts
Below are options and sources for obtaining a bank account after you have been declined at a bank. The options will be Non-ChexSystems and Second Choice Accounts. It is important to understand the differences we are explaining here. Non-ChexSystems Banks offer their accounts to anyone. This simply means that if they have an account called “ABC Checking” for instance, any consumer has the ability to enroll since they don’t use ChexSystems. As a good example, TD Bank doesn’t use ChexSystems, so this means that if you have bad marks on your report, you would still have access to their TD Simple Checking, as would anyone with no negative marks. This also means that your account would have no limitations, just like everyone else’s accounts.
Second Chance Accounts are intended for people with past banking problems. Credit card companies do this as well. Capital One, for example, has secured credit cards for people with less than perfect credit, and they also offer very high-end rewards credit cards for those with perfect credit.
Second Chance Accounts may be limited with check writing, ATM deposits, and other features. The bank will basically examine bank account features that typically present the greatest risk for fraud, and will remove such features on a Second Chance Account. Why would someone want a bank account with limitations? The basics will still be there, such as having a checking account for direct deposit, a debit card, and other functionality depending on the Bank.
Banks That Don’t Use ChexSystems (Updated 2018)
Not all banks use ChexSystems when opening accounts for consumers. Some banks may use a similar program, or may use only their internal system to see if you have any negative history with their own institution. If you find yourself on the receiving end of a decline when registering a new checking or savings account, you may want to consider any of the following banks that don’t use ChexSystems.
TD Bank – TD Bank doesn’t use ChexSystems when opening accounts, making TD one of the most popular banks. They are also a big name in the U.S. and Canada. Their most basic checking account is their TD Simple Checking, which offers:
No minimum daily balance
A low $5.99 monthly fee that can be waived with a $100 balance
US Bank – US Bank is a great option for those looking for simple solutions from a reputable national bank. Their “Easy Checking” has some good features worth noting:
No monthly fee if your balance is $1,500, or if direct deposits each month total over $1,000 (otherwise a $6.95 monthly cost)
Debit card is granted, and free ATM withdrawals at US Bank ATMs
Mobile check deposit
Online bill pay and other online banking features
Navy Federal Credit Union – If you, your family, or extended family are active duty military or veterans, then Navy Federal Credit Union is for you. Here are some of their features on their “Everyday Checking” option:
No minimum deposit
No minimum balance requirement
No monthly maintenance fee
Debit card and free use of NFCU ATMs, along with Co-Op Network ATMs
Checks and online features
Renasant Bank – If you live in the Southeast states (e.g., Mississippi, Tennessee, Alabama, Georgia, and Florida), this bank could be for you.
Sign up for eStatements and they waive monthly fees
Check writing included
Online banking including bill pay
Capital One – Capital One made this list even though they do look at ChexSystems. However, they don’t decline consumers based on ChexSystems unless there is a history of fraud. So, if you have a few bad marks on your report, it may be worth checking with Capital One, a sizable national bank. Their No-Fee 360 checking would be a great option.
$0 to open an account
No minimum balance
Online banking and bill pay
Debit card with free access to Capital One and Allpoint ATMs
BBVA Compass – While BBVA doesn’t use ChexSystems, they do use EWS. Their account offering is very good, which is why it made the list.
Wells Fargo – As one of the biggest banks in the world, Wells Fargo offers Second Chance Accounts. The name of the account is their Opportunity Checking Account. This is an excellent account that doesn’t have many limitations.
$25 initial deposit to open account
No monthly fee if you maintain a $1,500 balance, or if direct deposits add up to $500 or more monthly. Ten or more debit card transactions can get the monthly fee waived.
Online and mobile banking included
Online bill pay
Woodforest National Bank – With over 700 branches in 17 states, Woodforest offers a Second Chance Account. States include Alabama, Georgia, Illinois, Indiana, Kentucky, New York, North Carolina, South Carolina, Pennsylvania, Texas, and more.
$25 minimum deposit and $9 setup fee
Monthly maintenance fee $9.95 with direct deposit
Free withdrawals at Woodforest ATMs
PNC Bank – For those who wish to have a Second Chance Account with a big bank, PNC fits the bill. The account is called their Foundation Checking. A financial course they provide is needed for this account.
No minimum balance requirement
Within 6-18 months, if you are in good standing, the account can be converted to a regular checking account.
First National Bank – Second Chance accounts offered by First National Bank are called the Renew Checking Account. Here are some features.
No monthly minimum balance
$25 minimum deposit to open account
$15 one-time set-up fee
$9.95 monthly fee, $7.95 with direct deposit
Free online and mobile banking, free bill pay
Upgrade to regular account after 12 months
Radius Bank – Essential Checking is the name of the Second Chance Checking offered at Radius Bank.
Free online and mobile banking including mobile deposit
$10 minimum opening deposit
$9 monthly maintenance charge
BBVA Compass – BBVA encourages you to apply for one of their regular accounts, but if you are declined, they do offer the Easy Second Chance account.
Open with $25 minimum deposit
No ATM fees at BBVA Compass ATMs
Mobile banking, check deposit, and online banking
$13.95 monthly service charge
Other Banking Options
Now that we have reviewed several standard checking account options, I would like to review some other options aside from the traditional checking account route. We will explore prepaid cards and savings accounts.
Basics Of Prepaid Cards
What is a prepaid card anyway? A prepaid card is an alternative to a typical debit card from a checking account. A prepaid card allows you to spend money that you load onto a card. The benefit to this would be the ability to swipe a card at any merchant online or offline that accepts Visa or Mastercard. As an example, if you don’t have the ability to get a checking account, or don’t want a checking account, you can simply put money on your prepaid card, and spend that balance as you wish.
For the person who wishes to have no account at the bank, and perhaps doesn’t have enough credit to acquire a credit card, prepaid options can be a viable choice for people who love to operate with cash. Below are some providers and options for prepaid cards.
American Express – Serve and Serve Cash Back are two options at American Express for prepaid cards. Serve is very “reload” friendly, meaning there are no fees to add funds to the card. Their reload network also has over 45,000 locations, which include CVS Pharmacy, Dollar General, Family Dollar, Walmart, Seven Eleven, and Rite Aid. Serve Cash Back offers cash back based on your spendings.
Purchased free online or $3.95 in person
$4.95 monthly fee
Free ATM withdrawals at MoneyPass, otherwise $2.50 ATM fee
NetSpend Prepaid – This prepaid card is best for direct deposit. Netspend boasts its feature of getting paid two days faster with direct deposit. The card also allows you to add funds to it in addition to receiving direct deposits.
Free mobile app
No monthly fee, with $1 fee for each signature transaction and $2 fee for each PIN transaction.
Direct deposit of $500 or more, you pay $5 per month and all transactions are included
Chase – The Chase Liquid prepaid is a great option that is also FDIC-insured and offered in any state where Chase Bank is located. You must visit a branch in order to obtain the card.
No fee when using a Chase ATM to load or withdraw
$4.95 monthly fee, which can be waived when linked to a Chase Checking account
Walmart – The good thing about using MoneyCard by Walmart is that Walmart has locations everywhere. That’s not all, for MoneyCard offers 3% cash back and comes with free direct deposit and mobile check deposit.
$5 monthly fee waived if $1,000 was loaded during the previous month
Reload fees are up to $4.95
ATM fees are $2.50 per transaction
FamZoo – Teaching your kids how to manage money, or just giving them the luxury of having their own card, can be fun. You can transfer money between your own FamZoo prepaid cards and those you get for your children.
Monthly subscription is just $5.99 per family
No reload fees for direct deposit or cash deposits
Protecting Your Banking Record
Due to systems like ChexSystems, it is very important to protect your banking reputation. Ensure that you are doing everything you can to keep negative marks off your ChexSystems reports. Here are some measures you can take.
Pay all overdraft amounts and negative balances. Yes, things do occasionally happen and accounts get overdrawn. How you react to that will matter. Some people will just walk away from that account, go to a new bank, and open a new account; however, they will find out that the same $47 charge is still hanging over them.
ATM manipulation is another major problem that can harm your ChexSystems reputation. Don’t try to circumvent any rules that the ATM may have (e.g., deposit or withdrawal limits, manipulating check or cash deposits, etc.). Again, innocent mistakes happen, and if that is the case, make sure you communicate this with the bank. Don’t purposely try to manipulate any of the ATM features.
Look into getting an identity protection program in order to protect against fraud. Many times you might wind up having negative remarks in ChexSystems because someone else attempts to conduct fraudulent activities through identity theft. The best way to prevent this is to closely monitor your activity and to look into any identity theft program, such as LifeLock. Most banking institutions offer their own version or discounts for such programs.
As you have been able to see, the banking industry is connected through the reporting of consumer activity. It is thus very important to protect your banking record as discussed above. However, if you do find yourself in a bind, know that there are options. About 80% of consumers in the United States typically deal with some of these issues every year. When opening checking or savings accounts, it is best to visit a branch, where available; however, some banks may offer alternative enrollment processes either online or via phone. If you are declined, as we have discussed above, request a copy of your report, remove any marks you can, and look for alternative accounts or institutions that either issue Second Chance Accounts or don’t use ChexSystems.
Do not ever let past banking problems keep you from opening a checking account again. A bad consumer report in ChexSystem no longer has to stop you either. Follow this guide, and you won’t skip a beat with your banking needs.
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