Bank Accounts and ChexSystem

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.