Why Choose an Online Bank. Online checking accounts that do not use ChexSystems can make you bankable again. Online only banking is gaining in popularity — It’s convenient, hassle-free and safe. Most online banks can offer higher savings interest rates and lower fees because they save tons of money by not having physical branches.
ChexSystems Records are maintained for 5 years
Not having a bank account is costly and time-consuming. There’s the option of waiting out the 5-year reporting time period a ChexSystems record can remain on your banking history. But in the meantime, you need a place to deposit or cash checks, pay bills and save money.
A 2015 report by the National Consumer Law Center (NCLC) and Cities for Financial Empowerment Fund (CFE Fund) found that almost 17 million Americans don’t have access to a bank account – which can cost them an estimated $40,000 over the course of their lifetimes in high fees for alternative financial products.
The study also found over 80% of banks use a checking account reporting company, mainly ChexSystems or Early Warning Services when deciding whether to open consumer accounts. Having a negative banking history can be detrimental to financial growth.
The problems with ChexSystems reports
It goes without question that banks and credit unions must have a way to screen new customers for risk potential. But for some financial institutions, a negative account screening report results in an automatic denial of any account without considering the bigger picture.
ChexSystems fraud and account abuse notations are a huge problem
There are no standardized definitions of what constitutes “fraud” or “account abuse” which are the most common categories consumers get lumped into when reported to ChexSystems or reported to Early Warning Services. The lack of consistency often results in consumers being unfairly labeled in the same way as someone who has committed actual bank fraud.
Tacking a “suspected fraud” label on a consumer is often inaccurate. For instance, a bank customer may be a victim of a scam or theft. Denying someone from opening a bank account under these circumstances is misleading not too mention a violation of the FCRA which states information reported by a financial institution, bank or credit union must be accurate.
Banks can cause multiple overdrafts
Checking account reports mainly reflect account overdrafts or NSF transactions which make up the vast majority of account closures reported. Researchers in a study by Harvard Business School, estimated that only 2.5% of account closures are due to fraudulent activities; the remaining 97.5% are caused by overdrafts. The problem with overdrafts is that the bank may hold some responsibility in causing multiple overdrafts based on one transaction. A report by the Pew Charitable Trusts found that 40% of the biggest U.S. banks surveyed, order transactions in a way that leads to increased overdrafts.
The overdraft fees were caused by the order in which the banks processed debit transactions — purchases, payments and withdrawals — in order from the highest amount to the lowest. Instead of processing transactions in the order that your bank receives them, banks can choose to process the biggest first, which brings your account balance down more quickly, leading to more overdraft fees. It’s unfortunate that a customer could end up with a ChexSystems or EWS record that was caused by the bank. You deserve a new account.
Benefits of Online Checking Accounts
Benefits of online checking accounts that don’t use ChexSystems are pretty much the same benefits of in-branch checking accounts. Just about everything you can do with a checking account in bank branches, you can do with an online checking account.
Here are several benefits:
- An online checking account can help consumers in ChexSystems because online management tools allow customers to see full account details at any time. With instant alerts and updates it is easier to keep up with transactions and avoid mishaps that may land consumers in ChexSystems.
- Not having to maintain a large network of branches means banks can pass the savings onto customers. Other perks are often also available, like ATM reimbursements.
- Online banks’ checking and savings accounts come with higher interest rates and fewer fees than those at traditional banks.