Most banks use the ChexSystems in order to determine the level of risk for a client who wants to open a new banking account. The system is a considered an eFunds check verification service. When a client goes to open a new account, the bank representative will take the information of the client (social security number) and run their consumer credit report from the three main agencies; TransUnion, Experian and Equifax. Most bank accounts do not go directly off of credit scores when determining if they should approve a client’s application. In fact, most banks threw away this method after the recession (since most people have bad credit), it wouldn’t make the banks any money to discriminate in this matter. Instead, they check to see if clients owe any money with other banks (most of the time, default bank accounts were caused by overdraft fees which were not paid off in a timely fashion).

Over 80% of banks all over the world use the ChexSystems in order to accept or decline a client’s savings account application. (The same thing goes for other types of bank accounts such as Checkings and Student accounts). The other 20% are FDIC assured, but do not use the system to determine eligibility for a new account. This small minority of banks usually rely on other financial information. The exception being small type banks and special banks that offer Second Chance Bank Accounts. An average of 9,000 banks use the system with over 100,000 private branches also using it.

The system also offers their own products and services such as; Fraud Finder, ProspectChex and Transaction Monitoring. Some of the other things that banks look for in the system check when opening new accounts is banking irregularities, overdraft fees, fraudulent checks and unsatisfied balances. When this shows up on the background check, the bank representative will deny the client a new bank account. The consumer reporting agency is governed by the Fair Credit Reporting Act. Consumers have the right and the ability to receive a free system check report each year. They can also dispute items on their report, which is a good idea since the amount of identity theft has increased over the past couple of years.

Some people criticize the bank system check as being unethical and participating in unfair reporting practices. This is because the bank system check does not report the positives of the client’s bank account history; only the negative. It also does not provide the bank or the consumer with a risk analysis score such as with a FICO score (or credit score). Because of this, millions of people have been denied new bank accounts.

Some banks have been responding to the negative criticism by not using the bank system check for opening new accounts. Instead of using the system, the staff is being trained to make their own judgment and setting minimum limits to activating the system. Bank reps are also being trained to override the denial of a new bank account to a customer based on unfortunate circumstances out of their control, such as illness and job loss.

Now as a final note, there are some solutions if you can’t get a bank account because your name is in ChexSystems databases.

1. Find a bank that doesn’t use ChexSystems
2. Get a Second Chance Bank Account — A bank account designed just for people like you who can’t open a regular bank account because of ChexSystems
3. Use a special Prepaid Visa Card that functions just like a bank account
4. Wait 5 years.

So lets discussion these one by one.

Option 1: There are some banks that don’t use ChexSystems, but it’s hard to find them. The best way is to look at all your local banks and give them a phone call asking if they use ChexSystems. You can, in fact, only obtain this information on the phone.

Option 2: A Second Chance Account is another option. These accounts are internet bank accounts but really function just like a regular account. The cost is literally the cost — you will pay a lot more for one of these bank accounts.

Option 3: One very popular option these days is the use a special prepaid Visa card that works just like a bank account. You basically deposit money onto the card. Once there is money on the card, you can use it wherever you might use a normal visa card. You can make payments and deposits online. The big difference between one of these Visa cards and a normal visa card is you can’t have a negative balance on the card — so don’t think of it as a “credit card” but as a bank account with no overdraft!

Option 4: The final solution is to simply wait five years for your name to be removed from the ChexSystems list. This is not a very appealing choice for most people, since you pretty much need to have a bank account these days to function in modern society.

So if you can’t get a bank account because of ChexSystems, there are some real solutions out there. Non of them are as good as having a regular bank account, but some of them will do a good job as a substitute until you can get your name off ChexSystems.

Chexsystem – How to Avoid Them and Get Back on Track!

We’ve all been there: An unexpected bill, car repair or maybe you just didn’t realize that something had already left your bank account. It doesn’t take much to end up with NSF fees stacking up in your account! With almost half of today’s workforce struggling to live paycheck to paycheck, it is a situation that has become all too common. In fact according to a study by Bretton Woods Inc. the average family with a checking account in the US today pays out over $360 per year just in NSF fees. While you may be worried that all those fees may leave you with an empty account, or worse bad credit, there is in fact something much more unfavorable that could happen: Chexsystems.

In theory the Chexsystems idea is sound. Keeping track of people who owe money to banks preventing them from committing fraud makes sense. But unlike a credit reporting agency they do not keep track of the good and the bad, only the bad.  You could have been a customer with the same bank  for 30 or 40 years with an excellent credit rating, but one mistake could get your account closed and your name  blacklisted preventing you from opening another account for the full five years Chexsystems keeps your file. With over 80% of US banks and credit unions using Chexsystems it’s getting much harder to get a bad credit bank account or ’second chance checking account’.

If that’s the situation in which you find yourself, do not despair, all is not lost! There are ways of getting around a bad Chexsystems report.  Now I’m not advising you to run out and commit fraud, but for many why should one simple mistake deny you the chance for a checking account?  There are couple of options open to you: First you have to ask the question, ‘Do I really need a checking account?’ If you need someplace to deposit your paycheck and pay bills there are plenty of companies out there offering pre-paid debit/credit cards. Your paycheck is deposited straight to the card, which you then use to pay bills. Although if you do want to have your own account there are a few banks out there which do offer second chance checking accounts.

At the time of this article RBC Centura opens new accounts based solely on your Equifax score and do not consult Chexsystems. USAA and Carolina First Bank use Chexsystems but are willing to forgive one or two bad marks. Frost National Bank and Bank of America will allow you to open a new checking account so long as you can provide them with a letter from your former bank saying that the debt owed has been paid in full. (Be aware bank policies do change, so please check with your local branch.)

You may want to consider alternative bank accounts such as the Second Chance Bank Account which will guarantee you a checking account if your name is in chexsystems.

So whatever your situation, there is hope: A second chance checking account or pre-paid cards can help you start to rebuild your credit rating today and give you hope for a brighter tomorrow.