Can You Apply For Too Many Bank Accounts?
If you’re chasing higher interest rates or grabbing sign-up bonuses, you might be concerned about any potential consequences from opening all those bank accounts. In my experience, there are two main factors to be aware of when you open a bank account:
Banks pulling your ChexSystems report. ChexSystems is a consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the bank’s version of a credit bureau. If a person commits check fraud or overdraw their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database.
One thing that may raise up a red flag is opening up several bank accounts in a very short period of time. This is because of the connection of multiple bank accounts to a form of fraud called ‘check kiting‘. Kiting usually involves sending several checks between different banks to create an temporary surplus of money from the bank’s funds availability policies, and then cashing that out before all the checks fully clear. In the end, one of the banks is left holding the bag.
But for the most part, as long as you haven’t left any accounts in bad standing you shouldn’t run into any problems with opening up new bank accounts. I’ve opened up accounts at over 20 different banks already, sometimes two or three in one week, and have never been rejected by any of them. However, getting a negative ChexSystems record can leave you blacklisted from all the major banks. There are even specific websites that help such people find a place that will accept them.
As with credit reports, you can get a free copy of your ChexSystems report once a year.
Banks pulling your credit report. Yes, it is legal for banks to pull your credit report. There are a couple reasons they do so. First, this is another way for them to identify you and measure the risk of giving you a new account. Second, they may use this information to market other financial products like credit cards or home equity loans to you.
Before, I’ve talked about the difference between hard and soft credit pulls. Usually, bank will just perform a soft credit check, which doesn’t affect your credit score. (All those “pre-approved” credit card applications in the mail are from soft credit checks.) However, some banks also perform hard credit checks, which do hurt your credit score slightly. As none of them are offering me any credit, I’ve never understood why some major banks do this while others don’t - for example I have seen Citibank do hard pulls, but not Washington Mutual. I personally suspect that it may just be unintentional and they don’t know the difference. (And most people don’t know the difference so they don’t really get any pushback.) Although I haven’t tried, I would guess that if you spent the effort to appeal these hard checks to the credit bureaus, there may be a chance to get them removed.
To summarize, I usually try to find out first if the bank will perform a hard credit check. This isn’t an exact science, as the banks can often change their practices. If so, then I want to see it pay out at least $100. If there is no credit check, then my standards are lower. Otherwise, I don’t really worry about the number of bank accounts I have, although I do close them as soon as I don’t foresee any future benefit.
August 12th, 2007 at 4:54 am
That Chex report link isn’t working.
RE: In addition, the simple act of opening or closing a bank account will be recorded in their database.
A financial institution won’t report to Chex an account closed on good terms. A financial institution will report an account closed in the negative, or due to kiting or too many overdrafts, etc.
August 12th, 2007 at 7:57 am
Link works fine here.
To order by Phone Using Our Voice Message System:
Call 1-800-428-9623
August 12th, 2007 at 6:02 pm
Thanks ProfB. I changed the link to work now, unless you’ve been rejected due to ChexSystems you must order via phone, mail, or fax.
August 13th, 2007 at 11:57 am
Thanks for this information. I did not know that FACTA gave me free annual reports from other than the big three credit bureaus (Equifax, Experian, Transunion).
Does anyone here know how to find out what is in one’s own file at Acxiom, Choicepoint, and LocatePLUS.com?
August 13th, 2007 at 3:01 pm
Citi recently rejected me when I applied for an Ultimate Savings Account. They wouldn’t provide an answer to “why” over the phone (I have to fax my CR, letter, etc)… but I think it may be because there’s a fraud alert on my CR. Anyone have a similar experience?
August 14th, 2007 at 4:12 am
One more potential outcome from signing up for too many accounts — the headache that can result from keeping up with all the terms (like minimum monthly payments or minimum monthly direct deposits, etc.).
Of course, the free $100 is excellent pain relief, so no headaches for me!!
August 14th, 2007 at 4:42 am
I recently closed a savings account with a local bank which I had had since 1989. The bank official hinted that this would hurt my credit rating since the account was so old. Was this just a feeble attempt to keep my money earning a puny half-percent, or is there some benefit to keeping really old accounts?
August 14th, 2007 at 6:51 am
Dan, did your account have overdraft protection or some other line of credit associated with it? If not, I don’t see how closing a single, simple deposit account — whether old or new — could affect one’s *credit*. (But I’m not a credit pro.)
August 14th, 2007 at 12:43 pm
Dan - I’ve never seen a bank account listed on a credit report, have you? Like Steve said, unless there was a line of credit involved, there should be no connection.
August 14th, 2007 at 6:39 pm
Someone mentioned the Citibank Ultimate Savings account so I thought I’d briefly mention my experience with them. Signed up, received paperwork, PIN info, bank card, etc., all with my name misspelled. IN the meantime I called to get an update and they said they couldn’t verify my identity. Needed to fax them either banking info, CC statement, utility statement AND a land line phone statement. We have Vonage and they REFUSED to accept it. My only other choice was to bring my info into a Citibank building (none in my state) or call me at work (on the road, no office). Bottom line is, they SAID their mistake with spelling had nothing to do with it, but I was advised to shred the documents and forget the whole thing.
June 5th, 2008 at 1:55 am
[…] ChexSystems Banking History ChexSystems is a consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the bank’s version of a credit bureau. If a person commits check fraud or overdraws their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database. Getting an negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks. Via Fatwallet and my previous post asking Can You Apply For Too Many Bank Accounts?. […]
June 6th, 2008 at 12:53 pm
Curious about thoughts on the Wikipedia entry on “check kiting” which describes borrowing money to put into interest bearing accounts as illegal. (see last line below from Wikipedia entry.)
” Illegal borrowing
Some forms of cheque fraud involve the use of a second bank or a third party, usually a place of retail, in order to delay the absence of funds in a checking account on the day the cheque is due to clear at the bank, essentially robbing Peter to pay Paul. Such acts are frequently committed by broke or temporarily unemployed individuals or small businesses seeking emergency loans, by start-up businesses or other struggling businesses seeking interest-free financing while intending to make good on their balances, or by pathological gamblers who have the expectation of depositing funds upon winning. It has also been used by those who have some genuine funds in interest-bearing accounts, but who artificially inflate their balances in order to increase the interest paid by their banks.”
Is it? Is this Wikipedia entry valid? Has anyone been charged? Would the ChexSystems Banking be an attempt to track people doing this and deny them credit?
June 6th, 2008 at 9:15 pm
Your link to chexxvictims.com does not work as it asks for password.
I have seen that my report has multiple inquiries by the same bank.
Last week Alliant CU refused to open an account online due to Chexsystem but immediately sent me an email informing me that they did actually approve an account for me.
I do have more than 40 inqiries in my file but have only twice been refused an account.