7 Reasons Why You Were Denied a Checking Account (and What To Do About It)

Written By: Jason Andrews

Updated & Verified: April 2021

Denied a Checking Account? These Reasons are Probably Why...

  • Unpaid fees
  • Too many overdrafts
  • Too many bounced checks
  • Fraud
  • Bad credit
  • Errors on your ChexSystems report
  • Account abuse

The real question though is what exactly can you do about it? Keep reading to find out more.

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Did you know, over 1 million people have been blacklisted from mainstream financial service like getting a new checking account as a result of past financial mistakes? (1)

If you're one of these people, you know it can be embarrassing at best, and financially crushing at the worst.

Obviously, you’re going to need to take action if you want to be able to open an account. But before you know what to do, you need to know why you were denied an account in the first place. Some issues are easily-resolved, while others can take time and patience.

So, why might you have been denied? There are a number of reasons, but here are the seven most likely.

Once we’ve talked about why you might have been denied, we’ll talk about what you can do about it.  Let’s get started!

7 Reasons You Were Denied a Checking Account

denied bank account

Being denied a bank account can be extremely frustrating.

1. Unpaid Fees

When you apply for a bank account, the bank checks your information with a service called ChexSystems, which is an agency that tracks banking activity. Just as a credit bureau tracks your debts and repayments, ChexSystems tracks overdrafts, fees, and other banking charges. (2)

If there are unpaid fees from a previous bank, that’s going to appear on your ChexSystems report. Understandably, a new bank is going to hesitate to take you on if you owe your previous bank hundreds of dollars in fees.

Fortunately, this is easily resolved. If you have outstanding fees, call your old bank and pay them. The fees will then disappear from your ChexSystems report, and you should be able to open a new checking account.

If for some reason, you still can't get a new checking account your best option may be to join a bank that doesn't check ChexSystems.

2. Too Many Overdrafts

Banks like customers who keep money in their accounts. This much isn’t rocket science; it’s why a lot of accounts charge a fee if you drop below the minimum balance.

The same principle applies to overdrafts. Spend more than you have in your account, and your bank is basically lending you the money. This comes with a hefty overdraft fee, usually in the neighborhood of $35 per charge. (3)

The real problem arises when you apply for a new account. The bank will see that you’ve paid a lot of overdraft fees, and may decide not to take you as a customer. This is yet another excellent reason to avoid overdrafts whenever possible, even if you have overdraft protection.

3. Too Many Bounced Checks

Bounced checks work a lot like overdrafts; if you write a lot of them, a banker is going to assume you can’t manage your own finances. (4)

Bounced checks also cost you money in the form of added fees, in addition to any embarrassment you may suffer. Avoid bouncing checks like the plague.

4. Fraud

A bounced check indicates irresponsibility, but intentional fraud is a lot worse. If you have a criminal record for fraud, most banks will be hesitant to work with you.

Your best bet in this scenario will be to look for a second chance checking account, or apply for a joint account with a spouse.

In addition, you may be innocent of fraud, and someone else has stolen your identity. If someone has written bad checks in your name or otherwise damaged your credit, you could be denied an account.

5. Bad Credit

Bad credit can limit your ability to open a checking account at many institutions. Just like overdrafts and fees, other unpaid debts indicate to a bank that you may be a financial risk. (5)

Exactly what type of credit score qualifies as “bad” will depend mostly on the type of financial institution you’re with and the type of account you’re trying to open.

Credit unions and local banks will tend to have higher requirements, because they’re exposed to the most risk. Conversely, big national banks might not offer the same personal touch, but they’re more willing to accept customers with bad credit.

Simply being aware of your credit score won’t fix it; that will take years of hard work. But it can at least keep you from embarrassing yourself by applying for an account you don’t qualify for.

6. Errors on Your ChexSystems Report

Sometimes, even the most reliable companies and systems make a mistake. The same is true for ChexSystems.

For example, a bank employee could have mistyped a name, or inverted the digits in a Social Security number.

Thankfully, you can run a ChexSystems report on yourself to see what it says. If it shows overdrafts, fees, or other negative information that’s not true, you can file a dispute. You can also contact ChexSystems to discuss the issue if you have any questions. (6)

Once things have been cleared up, you should then be able to open a checking account. 

7. Account Abuse

There are other, miscellaneous reasons you can fall afoul of the banking system. Making frequent savings transfers, exceeding daily ATM limits, and other banking rule violations could limit your ability to open an account in the future.

How to Avoid Being Denied a Bank Account in the Future

If you’ve been denied, there are a few things you should do before applying for another account. The first step is ordering your ChexSystems report. Go over it, and see what kind of negative information you find. (7)

To begin with, there may be issues that are easy to clear up. If you have any unpaid fees, pay them off.

If there are errors in the report, dispute them. This will require documentation, and an investigation can take as long as 30 days. If information cannot be removed, it will eventually drop off by itself in five years.

If you were denied a checking account due to poor credit, things get a bit more complicated. You’ll have to order a copy of your credit report, and see if there are any accounts you can pay off in full. If not, you’ll only be able to boost your score slowly over time.

Conclusion

As you can see, there are a number of reasons you can be denied a checking account. The appropriate response will depend in large part on why you were denied in the first place.

Regardless, you can improve your chances of acceptance by maintaining good credit and avoiding fees and bounced checks. Do these things, and you should have no trouble getting an account in the future.

References

1. Jessica Silver-Greenberg, Writer, CNBC - https://www.cnbc.com/id/100927224

2. Ben Luthi, Experian - https://www.experian.com/blogs/ask-experian/what-is-chexsystems/

3. F. Norrestad, Statista - https://www.statista.com/statistics/325565/average-bank-overdraft-fee-usa/

4. Julia Kagan - https://www.investopedia.com/terms/b/bouncedcheck.asp

5. Jason Steele, Experian - https://www.experian.com/blogs/ask-experian/what-is-a-bad-credit-score/

6. ChexSystems - https://www.chexsystems.com/web/chexsystems/consumerdebit/otherpage/OnlineDispute

7. ChexSystems - https://www.chexsystems.com/web/chexsystems/consumerdebit/page/requestreports/consumerscor

Jason Andrews

About the Author

Jason is a journalist who specializes in covering credit repair, banking, and other areas of personal finance. As one of the nation's leading credit repair experts, he has helped countless people improve their credit scores and improve their lives financially. He lives in Omaha, Nebraska with his wife and two children.