Stay Off the Chex
July 15, 2014I’m not warning you away from cereal, but from ChexSystems – a consumer reporting database used by 80% of financial institutions that determines whether you will be able to open a checking or savings account with a bank or credit union. Any past banking issues within the last 5 years can appear on the report, including overdrafts, unsatisfied negative balances, fraudulent check deposits, or suspicious account activity. Unfortunately, low income individuals who are more susceptible to overdrawing their accounts are often barred from the traditional banking system and forced to use high cost check cashing options or pre-paid debit cards.
But even high income earners can face issues trying to open a bank account if they’ve had money troubles in the past. Zikomo Fields, recently interviewed by the Tampa Bay Times, makes $100,000 a year and has $23,000 saved but can’t find a bank willing to open an account for him. He has a negative report with ChexSystems from 4 years ago when he overdrew his bank account during a time of unemployment so he has his money loaded on a pre-paid debit card that doesn’t pay any interest on his money. Although there is no law that requires banks to reject a potential customer who has a negative ChexSystem report, these financial institutions have the discretion to make a case-by-case decision, and in Zikomo’s case, no banks were willing to make an exception for him.
Are you curious to see what is in your ChexSystem report? You can order a free copy of the report once every 12 months under FACTA, the Fair and Accurate Credit Transaction Act, which is an amendment to the federal Fair Credit Reporting Act. You can also order the report if you’ve been recently turned down by a bank or credit union within the past 60 days by making on online request.
Even if you do have negative information on your ChexSystem report, don’t give up. If you have an unsatisfied balance being reported from a bank account that was closed in the past, contact that financial institution and try to negotiate a debt settlement. Several years ago, my stepson overdrew his bank account to the tune of $600, including multiple $25 overdraft fees for $2 coffee purchases with his debit card that were allowed to go through as a “courtesy.” He was able to negotiate a payoff of $300 to cover the unsatisfied balance in full. You can also try to explain your situation to the bank if your negative history was caused by a financial hardship, such as divorce or unemployment. The bank has the authority to override their decision to decline your business if they choose to do so.
Also, you can check with your payroll department to see if there is a preferred bank or credit union that will take you as a new customer guaranteed. Many local credit unions will consider any employee, knowing that direct deposits of your paycheck will go in on a regular basis. This can help you get back to enjoying a traditional bank account and put you back on the path of financial well-being.