If you have a negative banking history, such as unpaid overdraft fees or bounced checks, you may find it difficult to open a new account. Many banks use a system called ChexSystems to screen potential account holders for risky behavior.
However, not all banks rely on ChexSystems. In this article, we’ll explore the different types of banks that don’t use ChexSystems and what you need to know before opening an account with them.
What is ChexSystems?
ChexSystems is a consumer reporting agency that tracks your banking history. Every time you apply for a bank account or overdraft protection, the bank may check your ChexSystems file to see if you’ve had any issues in the past.
ChexSystems collects information such as:
- Bounced checks
- A history of having accounts closed due to insufficient funds
- Check fraud
- ATM abuse
Having negative items on your ChexSystems report can make it difficult to open new bank accounts in the future.
Why Don’t Some Banks Use ChexSystems?
While most banks use ChexSystems to screen potential account holders, some banks have chosen not to participate in the system. These banks may choose other methods of screening applicants or may simply be more willing to take on customers with less-than-perfect banking histories.
For example, some small community banks and credit unions may prioritize serving local residents over using strict screening processes. Additionally, some online-only banks don’t use ChexSystems because they don’t have physical branch locations and therefore have lower overhead costs.
Types of Banks That Don’t Use ChexSystems
If you’re looking for a new bank account but are worried about your negative history showing up on your ChexSystems report, consider these types of banks that don’t utilize the system:
1. Online-Only Banks
Online-only banks such as Chime and Varo Money don’t use ChexSystems to screen applicants. Instead, they rely on other methods such as verifying your identity and checking your credit report.
These banks offer a variety of benefits, including:
- No overdraft fees
- No monthly maintenance fees
- Free ATMs nationwide
- Mobile banking apps with budgeting tools
However, one potential downside of online-only banks is that you can’t deposit cash. You’ll need to transfer funds from another bank or deposit checks using mobile check deposit.
2. Second Chance Checking Accounts
Some traditional banks offer second chance checking accounts for customers who have negative banking histories. These accounts may come with restrictions such as higher fees or limited access to certain services.
Here are some examples of second chance checking accounts:
- BBVA Easy Checking: $13.95 monthly fee, no ATM fees at BBVA ATMs
- Woodforest National Bank Second Chance Checking: $9.95 monthly fee, online banking and bill pay included
- Wells Fargo Opportunity Checking: $10 monthly fee, ability to upgrade to a regular account after 12 months of good account management
Be sure to read the fine print when considering a second chance checking account. You may need to meet certain requirements in order to avoid fees or upgrade to a regular account over time.
3. Credit Unions
Credit unions are non-profit financial institutions that are owned by their members (account holders). Because credit unions prioritize serving their members over turning a profit, they may be more willing to take on customers with less-than-perfect banking histories.
Credit unions typically offer lower fees than traditional banks and may provide additional benefits such as:
- Higher interest rates on savings accounts
- Lower interest rates on loans and credit cards
- Financial education resources
Find a credit union near you using the National Credit Union Administration’s locator tool.
4. Small Community Banks
Some small community banks may not use ChexSystems to screen applicants. These banks often have a more personal touch and may prioritize serving local residents over other considerations.
However, it’s important to note that not all small community banks are the same. Some may still have strict screening processes in place, while others may be more willing to work with customers who have negative banking histories.
To find a small community bank near you, check out this list from the Independent Community Bankers of America.
What You Need to Know Before Opening an Account
Before opening an account with a bank that doesn’t use ChexSystems, there are a few things you should keep in mind:
1. Fees and Restrictions
Make sure you understand the fees and restrictions associated with any account you’re considering. For example, some second chance checking accounts may come with higher monthly fees or lower ATM withdrawal limits.
Additionally, some online-only banks may require direct deposit in order to waive monthly maintenance fees. Make sure you can meet any requirements before opening an account.
2. Security Measures
Verify that any bank you’re considering has robust security measures in place to protect your money and personal information. Look for features such as two-factor authentication and FDIC insurance (up to $250,000 per depositor).
3. Customer Service
Consider the quality of customer service offered by any bank you’re considering. Look up reviews from current and former customers online to get an idea of what to expect.
4. Your Credit Score
Remember that applying for a new bank account can impact your credit score if the bank conducts a hard inquiry on your report. However, many banks don’t conduct hard inquiries when opening new accounts.
If you have negative items on your ChexSystems report, don’t despair – there are still options available to you! Consider opening an account with an online-only bank, second chance checking account, credit union, or small community bank that doesn’t use ChexSystems to screen applicants.
Just remember to read the fine print, verify the bank’s security measures and customer service quality, and make sure you can meet any requirements associated with your new account. With a little research, you’ll be able to find a bank that suits your needs and helps you get back on track financially.
What is ChexSystems?
ChexSystems is a consumer reporting agency that collects and maintains information on consumers’ banking activities, such as bounced checks, overdrafts, and unpaid fees.
Why do banks use ChexSystems?
Banks use ChexSystems to assess the risk of opening new accounts for consumers who may have a history of financial mismanagement.
What happens if my name is on the ChexSystems blacklist?
If your name is on the ChexSystems blacklist, it can be difficult to open a new bank account. The majority of banks in the United States use this database to screen potential customers.
Are there any banks that don’t use ChexSystems?
Yes, there are several banks that don’t use ChexSystems or offer alternative solutions to customers with poor banking histories.
How can I find out which banks don’t use Chexsystems?
You can research online or ask your local bank or credit union if they have any recommendations for non-ChexSystem banks. There are also websites such as Bankrate.com that provide lists of such institutions.
Can non-ChexSystem banks deny me an account for other reasons?
Yes, just like regular banks, non-ChexSystem banks still check applicants’ credit reports and may deny accounts based on unpaid debts or other financial issues.
What are some examples of non-ChexSystem banks?
Some examples of non-ChexSystem banks include BBVA Compass ClearChoice Free Checking, Capital One 360 Checking Account, and Discover Cashback Debit Account.
Are there any downsides to using non-ChexSystem banks?
Non-ChexSystem banks may have higher fees or less features compared to traditional banking institutions. It’s important to research and compare each option before making a decision.
Can I improve my chances of being approved for an account at a non-ChexSystem bank?
Yes, you can improve your chances by improving your credit score and addressing any outstanding debts or financial issues that led to your ChexSystems listing.
Can I remove my name from the ChexSystems blacklist?
You can request a copy of your ChexSystems report and dispute any inaccurate information. However, legitimate negative information will remain on the report for up to five years.