Just as an application for a credit card might not be approved, a bank or credit union could deny an account application. If this happens to you, be aware that you have other options.
Why can't I open a bank account?
A bank can deny your request to open an account because of past accounts that were closed due to negative balances, a history of overdrafts or problems verifying your identity.
If you're unable to open a bank account, here are some tips on what to do next.
What to do if you can't open a bank account
Verify your details
When you apply to open a bank account, you usually have to provide your name, address, Social Security Number, driver’s license or passport details and other personal information. Your bank will likely work with third-party companies to electronically verify your application. If the information can't be confirmed, it may lead to a denial. If you believe you may have listed incorrect data on your application by mistake, consider reapplying.
Review your consumer reporting files
It’s possible your bank may have confirmed who you are, but denied opening an account because of other reasons, such as a record of an unpaid balance from overdraft charges. Banks rely on consumer reporting agencies such as ChexSystems or Early Warning Services for information on applicant banking histories. When this information causes a denial, you have the right to receive a copy of your file.
The file could list outstanding debts from old accounts, the status of those debts (paid or unpaid) and whether a past account was closed due to suspected fraud. You can use the information from the report to contact the previous bank and pay off any outstanding fees or dispute errors. You could also file a dispute directly with the reporting agency. To reach ChexSystems, call 800-428-9623. For Early Warning Services, call 800-745-1560.
It’s difficult to have a bank account approved if you have a consumer reporting agency record. In addition, young adults and recent immigrants may not have a U.S. banking history for these agencies to verify. This may mean you can’t open a traditional account today, but it doesn’t have to stop you from accessing banking services. Here are some other options to consider.
Second chance checking
Some institutions offer second chance checking accounts specifically for customers who can’t qualify for a traditional option. The alternative account might lack some features such as overdraft protection or the ability to avoid monthly fees, but it gives customers a chance to develop a solid banking history. (Note that this option generally doesn’t involve applying for loans, so it won’t help you build a credit history.)
If you keep a second chance account in good standing for 12 months, your bank may switch it to a regular checking account. Once you reach that milestone, you could also shop around for top-notch checking and savings accounts or, if you live far from a bank branch, consider a free online checking account.
Many prepaid debit cards let you access important banking functions, such as direct deposit, online bill pay and electronic bank transfers to savings accounts (which can help you build your savings balance). They are generally available to customers regardless of banking history. Some of the best choices have no or low monthly fees and access to thousands of ATMs.
Not being able to open a bank account shouldn’t mean not being able to access banking. Whether you resolve the account issue directly with the institution or choose to shop around, there are a number of solid financial service companies that would be happy to have your business.
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Some institutions offer second chance checking accounts specifically for customers who can't qualify for a traditional option. The alternative account might lack some features such as overdraft protection or the ability to avoid monthly fees, but it gives customers a chance to develop a solid banking history.
Common reasons consumers are turned down for a bank account include a history of overdrafts, unpaid bank fees or suspected fraud. Applications can also be denied due to mistakes on one's checking account report. If you've been denied a bank account, ask the bank why this happened.
This might include paying off debts, maintaining good financial behavior, and rebuilding creditworthiness. Once the debts are settled or resolved, the blacklisting or associated fees may eventually expire or be removed, depending on the bank's policies and credit reporting regulations.
Many credit unions will open an account for you if you can reasonably explain why you haven't paid a ChexSystems debt, and some credit unions will not pull a report on you even if you do have poor history. Call and ask to speak to the branch manager or other bank official.
If you've had banking problems, ChexSystems will alert other banks about them for up to five years. Opening new accounts could be tough. Prepaid cards or second-chance checking could help.
In some cases, banks are allowed to refuse to open a bank account for an individual. You may, for instance, be refused a bank account if you have previously been declared bankrupt, or you have a very poor credit rating, or you have a fraud conviction. They are not required obliged to explain their reasons for refusal.
If you have a poor credit score, your bank could see you as higher risk, which can affect your eligibility for opening a new account. However, this score is just one of many other factors considered when you apply for a bank account.
You can be denied a checking account for a number of reasons, such as negative marks in your banking history, suspicions of fraud or an inability to verify your identity. Read on to find out why banks may turn down your checking account application and what your options are.
Basic bank accounts are intended for people with bad credit records or blacklistings. The application process for these accounts does not involve a credit check, but they provide necessary banking services.
Once you have been blacklisted you will have a bad credit record for anything from 2 – 10 years, depending on the type of listing that you have against you, but even after this period of time, a judgment can be issued against you if you have not paid the money that you owe.
To check if you are blacklisted, you can receive an annual complimentary credit report. This can be obtained from any of the prominent credit bureaus in South Africa. The report provides information on your credit score and allows you to review for any potential inaccuracies.
How long does negative information stay on ChexSystems and/or EWS consumer reports? Generally, negative information remains on ChexSystems and/or Early Warning Services (EWS) consumer reports for five years. Under the Fair Credit Reporting Act, certain negative information may be reported for up to seven years.
Bank accounts are typically frozen for suspected illegal activity, a creditor seeking payment, or by government request. A frozen account may also be a sign that you've been a victim of identity theft. Each situation requires specific actions to unfreeze the account.
You might open a checking account: to keep your money safe. to pay using a debit card or check, instead of cash. to get cash from an automated teller machine, or ATM.
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