Applying for Multiple Bank Accounts: Can You Apply For Too Many?

multibanksUpdated. If you open multiple bank accounts in order to take advantage of higher interest rates or sign-up bonuses, you may be concerned about any potential consequences from all that activity. 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 leaves their account with a negative balance, 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 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 30 different banks over the last several years, sometimes two or three in one week, and have never been rejected by any of them. However, having a negative ChexSystems record can leave you blacklisted from all the major banks (even if you make $100k a year). Information generally stays on your ChexSystems report for five (5) years.

As with credit reports, you can get a free copy of your ChexSystems report once every 12 months.

Banks pulling your credit report. Yes, it is legal for banks to pull your credit report. According to the consumer help site HelpWithMyBank.gov, per the Fair Credit Reporting Act, a bank can obtain a consumer report for any legitimate business need, including the following:

  • credit transactions
  • review or collection of an account
  • opening a deposit or savings account
  • underwriting of insurance

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.

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. Some banks do offer a line of credit in lieu of overdraft protection, but in general there doesn’t appear to be a rhyme or reason as to which ones do hard pull and which ones don’t. I personally suspect that it may just be unintentional and they don’t know the difference. (More importantly, most people don’t know the difference so they don’t really get any pushback.)

You can get a free copy of each of your credit reports (which lists all your hard pulls and which financial instituation did the pull) once every 12 months at AnnualCreditReport.com.

To summarize, I usually try to find out first if the bank will perform a hard credit check based on the reported experiences of other consumers online. This isn’t an exact science, as the banks can often change their practices. If it is likely they will, then I want to make sure that I am getting enough value from the new account because I know I can already trade a hard pull for $200-$500 of value from a credit card application. 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.

Comments

  1. 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.

  2. Link works fine here.
    To order by Phone Using Our Voice Message System:
    Call 1-800-428-9623

  3. 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.

  4. Steve Austin says:

    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?

  5. 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?

  6. 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!!

  7. 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?

  8. Steve Austin says:

    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.)

  9. 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.

  10. 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.

  11. 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?

  12. Lauderhill says:

    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.

  13. Maybe it is outdated but the link to get the free chexsystems report is not working, at least for me. I tried getting the report from their website and it doesn’t work either. Does anyone know how to get this report?

    Has anyone seen a credit pull on their credit report from Chexsystem? The last time I checked my report it showed they had checked my credit report. I do not remember giving them permission, can they do this?

  14. Newer ChexSystems post. I’ve never seen ChexSystems pull a credit report, at least not the kind that hurts your score.

  15. Dan,

    I do not know for sure however I SUSPECT that the reserve ratio was much higher at that particular time and because you signed up back then, for every dollar you put in the bank the bank gets to add more dollars to their books To your dollars by a much higher percentage and although you may have had a good interest rate if my argument holds true these rules would basically be making the bank a ton of electronic money. Additionally it could be that at the time you opened the acct the bank only had to pay a certain amount in deposit insurance and they knew that as a member bank of the federal reserve system if you were to close that account and Open a new one which required the new bank to pay more deposit insurance for the same amount of money it will affect them just as if you closed the old acct and reopened one at the same bank under the new deposit terms because Member Banks actually share money at the end of the day anyhow. It’s a federally sponsored ponzi scheme so I really had To crack up when I read that law about using the banks against one another to gain interest when that is literally exactly what they do to us! Screw it if they stop issuing them just start a bunch of business’s and open the accounts that way lol. Crooked ass banker scum.

  16. washerdreyer says:

    Just out of curiosity, what part of this post is updated? I can’t tell, I might not be the only one.

    • Just a few updates, someone asked and this post was written in 2007 so I figured it needed some dusting off. Added link to 100k earner getting rejected due to bad Chexsystems record, fixed broken link to request free Chexsystems report, added excerpted info from HelpWithMyBank.gov.

Trackbacks

  1. [...] 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?. [...]

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