The Bad Credit Checking Account Trap

If you are facing difficulty in opening a new bank account, ChexSystems could be the reason behind it. Banks have always been prime targets for criminals and fraudsters who misuse bank accounts with criminal intent. ChexSystems is a database of accounts that have been overdrawn or had checks bounce. When a person tries to open a bank account, the bank checks the list and if the person figures on it, the bank refuses to open an account. The logic is that a person with a history of having had a bad credit checking account is likely to repeat the pattern of behavior and these are the kinds of clients that banks do not want.

While this may appear, on the surface, to be a good system, the problem lies in the fact that it does not differentiate between a genuine error on the part of the account holder and criminal intent. For example, an automatic debit that was overlooked and hits a bank account just after it has been closed is enough to put a person’s name on the bad credit checking account list. The same thing happens if a deposit is made a couple of hours late and because of this a check that has been issued bounces. These are not criminal actions and there is no intent to defraud the bank. These are honest mistakes that anyone can, and probably has made at some time or another. A small accounting error that shows a few more dollars in the account that there actually exists can lead to a check bouncing and an innocent person’s name being found on ChexSystems.

ChexSystems is a legitimate initiative to help banks overcome the problem of bad credit checking accounts, but it does not indicate whether the problem was on account of criminal intent or honest mistake. Even if the debt that caused the name to appear in the database has been made good, the name remains. And it remains for 5 years, with no exceptions. An innocent and honest person listed as having had a bad credit checking account will find it next to impossible to open an account. The fact that most of the cases in the database are those of genuine errors or oversight is not a factor that ChexSystems takes into account.

Over 80% of all banks are part of ChexSystems and they will not open an account for a person whose name is on the list. No amount of explaining or proving that the mistake that caused the name to be on the list or that the error was quickly corrected will make a difference. The categorization of having had a bad credit checking aacount cannot be changed.

Finding a bank that is not part of ChexSystems is not easy and the number is shrinking every day, with more banks coming on board. However, there are still banks that are not part of the system and where a person who has had a bad credit checking account can open a new one. An online search will reveal additional information on the subject.