Common Reasons You May Have Been Denied a Checking Account

If you’ve been denied a checking account and are wondering why you may have been denied, this blog post will provide you with some of the most common reasons as to why you were denied a checking account

Denied a Checking Account?

There are a variety of common reasons as to why you were denied a checking account. This blog post explores the most common reasons for being denied a checking or savings account.

The most common reason for people being denied a checking account is that negative information appears on their ChexSystems Report. Your Chexsystems Report is similar to a credit report, but instead, it contains information about deposit accounts, such as checking and savings accounts. If you’ve mishandled checking or savings accounts in the past for reasons such as bouncing checks or leaving negative balances in your deposit accounts, this information will be reported to ChexSystems and will appear on your ChexSystems report.

Prior to opening checking or savings accounts, your financial institution will likely review your ChexSystems report. ChexSystems is a debit bureau and it collects information about your checking and savings accounts. So, if your bank or financial institution reviews your ChexSystems report and finds negative information, you could be denied a checking or savings account based on that negative information.

CSP Pro Tip – If you were denied a checking or savings account, you should review a copy of your ChexSystems Report, you can do so by heading over to their website, entering your information, and requesting a free copy of your ChexSystems Report. Federal Law mandates that you should have the ability to obtain one free ChexSystems report annually. Also, if you were denied a bank account, you can obtain a free copy of your ChexSystems Report.

We will explore the types of actions that may serve as reasons for being denied a checking account below.

List of Reasons You May Have Been Denied a Checking Account

Here is a List of Negative Items That Can Prevent You From Opening a Checking or Savings Account

1. Frequently Bouncing Checks

If you bounce a single check by accident, this is nothing to worry about. But, if you develop a habit of bouncing checks or even worse intentionally writing checks that cannot be cashed, this information may be reported on your ChexSystems Report. If a financial institution sees such behavior on your report, they may deny you a checking or savings account because you pose a risk. Banks do not like taking risks.

2. Leaving negative balances in checking or savings accounts

If you leave a negative balance on your checking or savings account, the negative balance may be sold to a collection agency and your financial institution may report the overdrawn account on your ChexSystems Report. If the bank you apply for a checking account reviews your ChexSystems Report (it’s very likely they will), they will see that your account was left with a negative balance, and they may deny your checking account application based on that information.

3. Too many overdrafts

If you write checks that your bank account cannot cover, your bank account may become overdrawn. Overdrawn bank accounts can result in derogatory information being added to your ChexSystems Report. If your financial institution reviews your ChexSystems report and finds such derogatory information, this could lead to you being denied a bank account.

4. Involuntary account closure

If you misused your bank account in the past and such misuse resulted in an involuntary closure of your account, such a closure may be reported on your ChexSystems report. Involuntary closures make it difficult for you to be approved for checking or savings accounts in the future.

5. Suspected Fraud

If you’ve used bank accounts in the past to commit fraud, such fraudulent behavior may appear on your ChexSystems report, making it very difficult for you to open bank accounts in the future. Fraud includes writing checks while knowing that you have insufficient funds in your bank to cover.

What Should You Do If You’ve Been Denied a Checking Account?

1. Check Your ChexSystems Report

If you were denied a checking, savings, or other types of deposit account, the first thing that you should do is pull a free copy of your ChexSystems report. Check your report and see if there is any negative information on that report. If there is negative information, you should take steps to address the negative information so that your bank account applications are approved in the future.

When you check your ChexSystems report if you find information that does not belong to you or any inaccuracies, contact ChexSystems are bring that to their attention so that it can be corrected. Incorrect or inaccurate information, such as the wrong social security number or name could cause your checking account application to be denied.

2. Reconsideration

If you were denied a bank account, you should ask your bank to reconsider their decision to deny you an account. Ultimately, it’s up to your bank to decide whether to approve or deny your bank account application. If you have a strong relationship with your bank, you should ask them to reconsider their decision. If you were denied an account, keep in mind that federal law mandates that financial institutions provide you with the reason for your denial.

3. Consider Applying for a Second Chance Account

If you were denied a checking account, you should consider applying for a second chance account. Usually, the financial institutions offering these accounts don’t check your ChexSystems report and are willing to look past negative information from your past, so getting approved for an account is much easier than a regular bank account.

That said, when choosing a second chance bank account, read the details about the account because such accounts often come with fees and minimum deposit requirements that some people may not like. So, do your research before applying for a second chance bank account.

What Banks Offer Second Chance Checking Accounts?

There are many banks that offer second chance checking accounts, here is a list of some of those financial institutions:

  1. BBVA
  2. Chime
  3. Peoples Bank
  4. Wells Fargo
  5. Radius Bank
  6. GTE Financial

Frequently Asked Questions (FAQs)

1. Why was my checking account denied?

You may have been denied for a checking account for a variety of reasons. One of the main reasons that some people are denied bank accounts is that negative information appears on their ChexSystems report. ChexSystems report is often reviewed by financial institutions before they approve you for an account. So, if you’ve been denied an account, review your ChexSystems report to determine whether there is something negative prohibiting you from being approved.

2. Can you be denied a checking account?

Yes, you can be denied a checking account for a variety of reasons.

3. What is a 2nd chance checking account?

A second chance checking account, is as the name suggests, a bank account offered to those who’ve mishandled accounts and finances in the past. They are much easier to be approved for than regular bank accounts and many financial institutions offering them do not even review your Chexsystems report.

4. Do you need a good credit score to open a checking account?

No, most banks do not look at your credit when determining whether to open a bank account for you. Your credit score is really important when you want to borrow money, such as when you apply for a credit card or a personal loan.