What To Do When Denied a Checking Account
Many Americans today lack basic checking and savings account access because of past financial mistakes. In fact, according to the Federal Reserve, over 8 percent of the U.S. population is denied either a checking, savings, or mutual fund account because of a financial wrongdoing with a bank. Everyone makes financial mistakes, but when these mistakes include unpaid overdraft fees or other bank violations, it puts a person’s finances in chaos. Without a checking or savings account with federally insured bank, referred to as the Federal Deposit Insurance Corporation (FDIC), or a credit union account, it places an extra financial burden on those already saddled with debt. For banks, the risk of taking on high risk clients is too much. When denied a checking account, an individual is forced to use alternative financial services (AFS). These commercial bank and credit union alternatives include check cashing companies, payday loans companies, and auto title loan lenders, to name a few. All kinds of problems arise with the use of alternative financial services. The mere act of cashing a paycheck becomes an expense. The double digit interest rates that go with payday loans will eat up a large portion of a person’s earnings on a monthly basis before they even receive their next check. Banks refer to people who are ineligible to open a checking or savings account as “unbanked.” Because about 80% of banks subscribe to a third party company called ChexSystems, most people who have violated their bank’s policies are flagged as problems when they try to open an account with another bank. Although the laws that allowed companies like ChexSystems to create databases on clients were intended to stop professional criminals from creating fraud, the new target audience is clearly the poor. People who possess a checking or savings account but also use an AFS are referred to as “underbanked.” About 12 percent of the U.S. population fits into this category. According to the Federal Reserve, the majority of people classified as unbanked are low income households with incomes less than $40,000 per year. It’s no wonder that people who live paycheck to paycheck are experiencing the greatest banking issues. The current trend of banks moving out of poorer neighborhoods to areas with wealthier clients only highlights this epidemic. It’s also a difficult period for younger adults today. For young people between the ages of 18 and 24, half of this population is either unbanked or underbanked, according to the FDIC.
Actions You Can Take
If you’ve been denied a bank account for something you did wrong, you can contact your bank and ask them to work out a plan with you to pay the account current. They may or may not work with you. If they will negotiate a payment plan or settlement, make sure you keep all of your documentation. Contact ChexSystems if you feel that you are not in the wrong, and file a dispute. They will allow you to submit an online dispute, and they’ll provide you with a verdict about your case within 30 days. But unless your problems stem from identity theft, you shouldn’t get your hopes up about this option. Call them at (800) 325-7775. A prepaid debit card will allow you to have functions similar to a bank account, but there are usually costs associated with this option.You may have to pay a minimal monthly fee, an annual fee, and even a “cash reload” fee. Unfortunately this option is still costly, and it doesn’t address the larger problem of debt relief. Second chance checking accounts allow people with prior banking issues to open a new checking account. You’ll still have to pay some fees to use this service, but it’s a better option than prepaid debit cards. The bad news is that a limited amount of banks offer this program. Wells Fargo’s Opportunity Checking is a good option if you have a branch near you. Their $10 a month maintenance fee is waived if you use your debit card 10 times during a month, keep a minimum daily checking account balance of $1,500 or if you direct deposit a paycheck of at least $500. If your debt problems are severe, you might want to consider filing for bankruptcy. Although this option won’t remove you from the ChexSystems’ blacklist, because unpaid overdrafts are considered fraud, a bankruptcy can help you to reduce your overall debts. This extra income will help you to shore up any unpaid debts with your bank and ultimately get your checking account open again. You can contact us for a free consultation about resolving your debt issues through bankruptcy.
Your Worst Option
Your very worst option is doing nothing. Creditors are industrious, and they can confiscate or place liens on your property, garnish your wages, etc. to satisfy a debt obligation. It’s best to get ahead of the problem and take control of the situation.
Have You Been Denied a Checking Account?
Start Fresh Utah is federally recognized as a debt relief agency, so we know how to resolve your credit problems.We may be able to help you to decrease or eliminate all of your debts through bankruptcy. This includes negative accounts with your bank, payday loans, title loans, etc. If you’re on the ChexSystems’ blacklist, your problems are not going to simply go away. So if you’ve been denied a checking account, you should definitely take action today.