Business Banking

Why can't I open a bank account?

If you're having trouble opening a bank account, you may be wondering what the problem is. In this post we go over reasons you might be denied a bank account and what you can do.

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The vast majority of people have a bank account, which is one of the indicators of their financial stability. Having a bank account shows that a person has full control over their finances, which allows them to access many other banking offers and products. However, if you expect to walk into a bank and get your bank account application granted in a few minutes, you might end up unpleasantly surprised because there is no guarantee you will get one.

Just like applying for loans or credit cards, applying for a bank account may involve in-depth reviews and risk analysis of your previous financial behavior. In other words, if the financial institution is not thrilled about what it sees, you will be most likely denied. But fear not, there are several things you can do to remedy this situation.

What to do if you can't open a bank account

If you are unable to open a bank account, here are 6 things you can do.

1. Verify your details

Every application for a bank account starts in pretty much the same way. You have to provide personal information such as your name, address, a valid government issued photo ID, SSN (which stands for a Social Security number that consists of a nine digit number), etc.

Making errors in any of these items while you are fulfilling the form can affect your bank account application. This information verifies that you are who you say you are, and if the bank can't confirm that, there's no way that you will get a bank account. In many cases, banks rely on third party companies to check your application information.

2. Pay unpaid bank fees

All right - the bank has confirmed who you really are, but they still denied your request. This is where ChexSystems comes into play. ChexSystems is a company that specializes in tracking consumer banking activity. The thing is that if you have or have had other bank accounts and you have somehow forgotten to pay a fee for early account closure and an insufficient funds fee, they will flag you in their database.

This means that if you have a negative banking history, the bank you are trying to apply within might hesitate to take you on as a new client. All in all, it is not a bad idea to pay your outstanding fees as soon as you can. Even more, you can avoid them by taking time to read your bank's policies in terms of fees and charges.

3. Clear up your ChexSystems report

No matter what, if you have a bad record of managing your bank account, banks will find out about it through the ChexSystems report - and there's nothing you can do about it except to pay for what you owe. In a nutshell, consumer reporting agencies like ChexSystems know everything about your past banking account history.

In general, mismanagement is a consequence of:

  • serial overdrafts
  • too many bounced checks
  • or any other type of account abuse

To clear up your ChexSystems report, you can call them at 1-800-428-9623 or visit their website to request a copy of your report. Once you find how much money you owe, you can come up with a plan and pay off that debt in order to clear your negative history. In addition to this, debts may fall off your ChexSystems report after five years, but it’s always a good idea to confirm.

4. Use prepaid cards

If you can't open a bank account and don't know what to do - don't despair! One option available to you is a prepaid debit card that works pretty much the same way as any other debit card. The best part is that you don't need a bank account or credit check to get one.

A prepaid debit card is a card where you can load funds in advance, and then you can spend the money that is on it at any time. This is one of the best options because there is no credit involved, and you don't have to open a bank account.

5. Find a bank that doesn't rely on the reporting agencies

Finally, if you have had it enough after being denied over and over, you might want to find a credit union or some bank that doesn't use any background checking services, such as ChexSystems or credit score checks.

Although it can be devastating to be rejected by so many banks, the good news is that you have identified the problem and can start improving your personal finances. The sooner you get started, the sooner you will be able to enjoy all the benefits of a good financial history.

6. Switch to cash

Being unable to open a bank account is the perfect time to start using cash. By switching to a cash-only budget, you have the opportunity practice discipline in your financial behavior, which will, in return, help you to open a bank account in the future.

The easiest way to switch to cash only is to set money aside for each bill you have. This way, you can control your spending because once your budget is gone - it's gone!

Consider alternative checking accounts

If previous things are not working out, it is time to consider a second chance banking account. These accounts are dedicated to people who are not able to open a standard checking account. Logically, a second chance banking account (or prepaid debit) doesn't rely on ChexSystems to check customers' qualifications.

The best part about second chance accounts is that they work much like regular checking accounts and can help you improve your terrible banking history over time. This means that one day you can apply for a traditional checking account.

But the downside with a second chance account is that they can have higher monthly fees and don't always offer all the benefits you get with standard accounts, including access to direct deposit, overdraft protection, and so on and so forth. Even with these limitations, if you have no other options, a second chance checking account is a good call. Unfortunately, only over 20% of banks offer this type of account.

If however you own a business, are a contractor, or have a side hustle you can also consider an unlimited cashback debit card with Nearside.

How to open a bank account

Those who want to open a bank account can do it in a few simple steps, plus there is no shortage of options out there! Most banks follow a super easy to follow and straightforward process similar to the one we have described below.

1. Choose a bank

2. Visit the bank website or branch

3. Pick the product that suits you best

4. Provide your information

5. Your financial history

6. Consent to the terms

7. Print and sign

8. Fund your account

9. Start using your account

Can a bank refuse to open an account?

Yes - banks have the discretion to choose to which parties and under what terms they provide their services. A bank's decision not to open a bank account is absolutely legal. There are several reasons why a bank may refuse to open an account, and they are all justified as long as they don't constitute unlawful discrimination on the grounds of religion, sexuality, disability, sex, and race.

Although they are not required to explain their reasons for this, you can make a claim for discrimination in court if you believe their decision to refuse to open your bank account is based on unlawful grounds, or you can even complain to the Financial Ombudsman Service. Those things happen rarely, and if you get denied, it is because of the previously mentioned reasons.

Can I open a bank account if I owe another bank money?

There's no hard and fast rule that says you can or can't open a bank account if you owe money to another bank. However, don't forget that approval from another bank for a new bank account doesn't mean you don't have an obligation to pay back what you owe the previous bank.

Since almost each and every bank checks credit reports and past financial behavior of applicants to avoid risky clients - you will find it difficult to open a bank account if you owe money to another bank! Even more, if you owe and have funds in your account, the bank has the right to take your funds in order to pay off what you owe!

Can I open a bank account over the phone?

Tons of banks allow clients to open a bank account either online or over the phone. However, you may need to make a phone call first or take a look at the bank's website to find what it takes to open a bank account.

How much money do I need to open a bank account?

Every bank has its own set of rules and requirements for opening a bank account. Some allow you to do it with no balance, while others require a relatively small deposit.

On the other hand, interest bearing savings accounts require a much larger deposit. Be sure to contact your bank and ask how much money you need to deposit to open a bank account, what the minimum balance is. Also, don't forget to ask about fees if you accidentally go below the minimum balance.

How long does it take to open a new bank account?

The application process for a bank account is pretty quick. In fact, you can apply online in less than 20 minutes. If you opt to do it in person, it may take a bit longer.

However, the verification process of your information can take a few days until they make a final decision to allow you to use your bank account.

Can I use an ATM without fees?

ATMs save you time when you have to withdraw money from your bank account without physically going to your bank branch. However, some withdrawals could cost you a lot, which is why you have to ask about ATM fees.

This is especially true when it comes to using ATMs operated by other banks or third parties. Don't neglect this part because those fees can add up extremely fast. With that said, some baking options such as Nearside, offer no fee including no ATM fees.

Do I need a bank that has online banking and a mobile app?

In today's digital and fast paced world, you can accomplish a lot through computer and mobile apps. You can pay your bills, deposit funds, check your balance, or even transfer your money between accounts using a mobile app.

If this is important to you, check if the bank offers these features.

Should I have access to money when traveling?

If you are thinking about traveling internationally in the near future, you need to check if your bank is offering intercontinental access to money.

There are several ways to do this - from getting cash at ATMs to using your debit card as usual. Check out with your bank to make sure your account and card works while you are abroad and ask about fees regarding it.

Why is customer service important in banks?

When something goes wrong, the last thing you need is an unhelpful and unresponsive bank.

To make sure your bank has good customer service, ask a trusted neighbor or friend, do your homework and check online reviews, and see their opinion about the bank's customer service.

The takeaway

Last but not least - commit to changing. Finding yourself unable to get a bank account should be a wake up call to start making small changes in how you spend your money. Think about living on a budget and try to keep your finances under control, it can help you a lot in the future.

Pay off all your debts, focus on fixing your credit history, work on your saving habits, and over time, you will be able to open a bank account.

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