Why Was I Denied A Checking Account? (And How to Fix It)
- Annette Harris
- Oct 22, 2024
- 4 min read
Updated: Mar 11

Have you recently been denied a checking account? Don't worry—you're not alone. Many Americans face this frustrating situation every year, often due to something called "ChexSystems."
What is ChexSystems and Why Does It Matter?
When you apply for a checking account, financial institutions use ChexSystems—a consumer reporting agency—to evaluate your banking history. Think of it as a "credit score" specifically for your banking behavior.
If you've been denied an account, it's likely because ChexSystems has flagged something in your banking past. Let's explore the most common reasons and how you can address them.
4 Common Reasons Banks Might Deny Your Checking Account Application
Multiple Account Openings and Closings
Regularly opening and closing accounts can have a detrimental effect on your ChexSystems score. Financial institutions interpret such actions as warning signs of potential financial instability or fraudulent behavior. Banks and credit unions prefer clients who demonstrate a commitment to lasting partnerships. Frequent account switching may suggest an attempt to evade fees or other account-related problems, such as overdraft fees or debts. Banks are cautious about customers who have multiple account openings and closings.
How to fix it:
Keep your accounts open for at least one year when possible
Ensure accounts are closed properly with no outstanding balances
Be prepared to explain your account history if asked during applications
Multiple Overdrafts
An overdraft happens when you spend more money than you have in your checking account.
Here are some common ways overdrafts can occur:
Checks: Writing a check for an amount greater than your balance.
Recurring payments: Automatic bill payments or subscriptions that deplete your account.
Electronic transfers: Sending money electronically when you don't have sufficient funds.
ChexSystems looks at how frequently you overdraft, the amounts involved, and how recently they occurred.
How to fix it:
Track your spending carefully using your bank's mobile app
Set up low balance alerts (most banks offer this free service)
Consider opting into overdraft protection services
Balance your checkbook regularly or review your online transactions weekly
See my feature in BestLife 5 Reasons You Shouldn't Get a Joint Bank Account With Your Partner
Unpaid Fees
Depending on the type of bank you have, you may be charged certain fees. Your ChexSystems score can decrease significantly if you don't pay these fees. Some banks have monthly maintenance fees if you don't maintain the minimum balance. There are also overdraft fees, returned check fees, and more. Here are a few of the most common fees that you may be subject to:
Bank Account Fees:
Monthly maintenance fee: A regular charge for simply having an account.
Minimum balance fee: A fee charged if your account balance falls below a certain amount.
Overdraft fee: Charged when you spend more money than you have in your account.
Returned check fee: Charged when a check you write bounces.
ATM fees: Charged for using an ATM.
Wire transfer fee: Charged for sending or receiving money electronically.
Foreign transaction fee: Charged for using your debit or credit card outside of your country.
Inactivity fee: Charged if your account has no activity for a certain period.
How to fix it:
Pay off any outstanding fees from previous accounts
When choosing a new bank, compare fee structures carefully
Look for banks offering free checking accounts with direct deposit
Set calendar reminders for important account dates
Fraudulent Activity
Fraudulent activity on your bank account can have a devastating impact on your ChexSystems score. Even if you're not responsible for the fraud, it can still negatively affect your report.
Banks monitor your account patterns and may flag transactions that:
Deviate from your normal spending habits
Don't align with your reported income
Appear suspicious for other reasons
How to fix it:
Report suspicious activity immediately
Keep contact information updated with your bank
Regularly monitor your accounts for unauthorized transactions
Consider setting up transaction alerts for purchases over a certain amount
See my Nasdaq feature 10 Steps to Finding a Better Bank
Understanding Your ChexSystems Score
Unlike a credit score (which ranges from 300-850), a ChexSystems score ranges from 100 to 899. The higher your score, the lower your risk to banks.
ChexSystems Score Interpretation
Each bank has its own criteria for determining acceptable score ranges. However, generally speaking:
Scores below 600: Indicate a higher risk profile and could limit your options for opening new accounts.
Scores between 600 and 700: Indicate a moderate risk, and you might encounter some restrictions or higher fees.
Scores above 700: Indicate a lower risk, and you're likely to qualify for standard checking accounts.
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How to Improve Your ChexSystems Score
If you've been denied a checking account due to a negative ChexSystems report, you can take the following steps to improve your score:
Request Your ChexSystems Report
You're entitled to one free report every 12 months. Visit ConsumerDebit.com or call 800-428-9623
Dispute Errors: Review your ChexSystems report for inaccuracies and dispute any errors you find with the banking institution.
Pay Off Your Banking Debts: Resolve any outstanding debts related to your bank accounts.
Consider Second-Chance Banking: Open a second-chance checking account or prepaid debit card to establish a positive banking history.
Consider Alternatives: Explore alternative financial services that may have less stringent requirements, such as prepaid debit cards or credit unions.
Moving Forward with Confidence
Managing your banking relationship effectively is an important part of your overall financial health. By understanding how ChexSystems works and taking proactive steps to address any issues, you can get back on track to having a normal banking relationship.
Finding banking difficult? You're not alone. Schedule a complimentary consultation today to discover how financial counseling can help you navigate these challenges and build a stronger financial future.
Did you find this information helpful? Share it with friends or family who might benefit from understanding their banking options better!
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