Cash News
Opening a bank account is usually a quick and painless process: Simply fill out a form online or in person and have your account open in minutes. However, there is a chance you could be denied a bank account.
There are a few reasons why your bank account application could be denied, and it can be frustrating. Here’s what to do if you are among those hit with a rejection.
Can you get denied for a bank account?
Yes, a bank or credit union can deny your application when opening a new account. Like any business, these institutions take steps to protect themselves. If there’s something in your banking history that is considered a red flag, it may result in a denial.
Fortunately, a denial doesn’t mean you have no recourse. First, should you understand the possible reasons your account application was denied. Knowing the cause can help you determine the appropriate course of action.
Reasons your bank account application could be rejected
There are many possible reasons your bank account application was denied. Banks may not always provide a precise explanation for the rejection. However, some common occurrences can lead to denial.
For instance, you might have a history of overdrafts, accounts closed with negative balances, or unpaid bank fees. In that case, the bank may not be confident in your ability to maintain the positive banking relationship it wants with new customers.
Another reason your application might be denied is if you can’t provide appropriate identification, or if you do provide ID, the bank can’t verify your identity with it.
Do banks check your credit report?
Unlike credit card issuers, banks don’t check your credit report when you apply for an account. Instead, they rely on banking-specific reports to check your history, such as ChexSystems or Early Warning. These reports focus on your banking history, which shows unpaid fees, overdrafts, and bounced checks, among other issues.
Read more: Can you open a bank account with bad credit?
What to do if you’re denied a bank account
Being denied a bank account can feel deflating, but it doesn’t mean you have no chance of opening one. The steps below may help you open an account even if initially denied.
Check your ChexSystems report for errors
As mentioned, banks and credit unions often use the ChexSystems report to check your banking history. If you are denied a bank account and don’t believe the action is justified, you can start by checking this report for errors.
Fortunately, looking up your ChexSystems report is easy. The company provides instructions on requesting a report for yourself or someone else. If you want your report, you must fill out a simple, one-page form ChexSystems provides. However, it also requires you to provide the following with the form:
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A notarized Power of Attorney or
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A notarized copy of specific written instructions signed by the consumer
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Correspondence must include consumer’s full name, current address, date of birth, and Social Security number
The process is more involved if you want to request the form for a minor, as you must provide several pieces of documentation.
Pay past-due bank fees
A common reason bank account requests are denied is that the applicant has past-due bank fees that appear on their record.
If you have past-due fees, you can pay them and see if that changes the outcome of the application. You can also communicate this to the bank and ask how long you should wait before applying again. Paying these fees may not always make a difference, but it’s worth a try, especially if you strongly desire to open this particular bank account.
Open a second-chance account
If you’re unable to resolve the issue with the bank and your application is still denied, consider a second-chance bank account. As the name suggests, second-chance accounts give people with checkered banking histories another chance.
These accounts are not always ideal, as they may have higher fees, fewer benefits, and more restrictions than standard accounts. However, they let consumers establish a healthier banking history, which they can use later to open a standard account.
Choose a bank that doesn’t use ChexSystems
While many banks use ChexSystems, not all of them review this report when approving account applications. And some of the banks that don’t use ChexSystems also have minimal fees and excellent benefits, including SoFi, Capital One, Chime, and Varo.