Can I open a bank account if I have a negative balance at another bank?
A bank can deny your request to open an account because of past accounts that were closed due to negative balances, a history of overdrafts or problems verifying your identity.
You might think that anyone can open a bank account, but you actually have to apply for a bank account at all financial institutions. You can be denied an account if you're in debt to another bank because of an overdrawn account or overdraw your account too often.
If you have a negative record, banks might refuse to work with you as a new customer. If you want to clear up the report, start by getting a copy of it. You can obtain free reports from ChexSystems and Early Warning Services every year to monitor your record.
Switching bank accounts if you have an overdraft is possible, but it can have long-term effects on your personal finances. If at all doable, restoring balances to $0 and paying overdraft fees before switching accounts is a good idea. It will help you access more flexible banking options at other institutions.
Bottom Line. The primary reasons people can't open a bank account are negative items on a ChexSystems or Early Warning Services report, errors on the reports or bad credit. If your bank account application is denied, find out why.
Banks typically do not have direct access to information about a customer's accounts at other financial institutions. However, they may be able to obtain information about your other accounts through various means such as a credit report, if you give them permission to do so, or through a court order.
If a bank or collection agency tries to sue you after the statute of limitations is up, you should seek legal help. The statute of limitations is often between 3 and 10 years and starts from your last payment date.
Your bank may close your account and send you to collections if you're always in overdraft and/or don't bring your account up to date. An overdraft occurs when your account falls below zero. Your bank will let your account become negative if you have overdraft protection but you may face fees.
A second-chance bank account is a type of bank account that's available for consumers who have had issues with overdrafts or other negative banking activity. This type of account typically doesn't require a ChexSystems report review.
Here are some new account fraud indicators to keep an eye out for: Lack of valid identity proof. Applicants who cannot provide identity validation evidence issued over a year ago might attempt to hide their true identity, definitely raising suspicions of potential fraud. Unusual social security profiles.
What do banks check when opening an account?
Rather than look at your history of borrowing money, the bank looks at your history of managing bank accounts. They will most often run the check through a company called ChexSystems. “If you have made mistakes with banks in the past, you might have been put on the ChexSystems list,” says Dellutri.
You'll need to provide the same information whether you're opening a savings account or other deposit account. The minimum information that banks are required to get from account applicants are name, address, date of birth and an ID number.
| Bank / Credit Union | Forbes Advisor Rating | Learn More CTA text |
|---|---|---|
| Capital One 360 Checking Account | 4.5 | |
| Chime® Checking Account | 4.4 | Learn More |
| LendingClub Bank Rewards Checking | 4.2 | Learn More |
| Varo Bank Account | 4.1 | Learn More |
Why can't I open a bank account? A bank can deny your request to open an account because of past accounts that were closed due to negative balances, a history of overdrafts or problems verifying your identity. If you're unable to open a bank account, here are some tips on what to do next.
Generally, negative information remains on ChexSystems and/or Early Warning Services (EWS) consumer reports for five years. Under the Fair Credit Reporting Act, certain negative information may be reported for up to seven years.
If you can't afford to pay off any of your overdraft
If your financial situation is unlikely to get any better, you should contact your bank. They might agree to: temporarily pause interest or fees on your overdraft debt. let you pay any essential costs like food and bills before paying off your overdraft.
Your bank might offer you an overdraft line of credit that you can draw against. Say you have a checking account and the bank grants you a $1,000 overdraft limit. That means you can spend all the money in your account, plus up to $1,000 more before the bank will block any further transactions.
Generally, a bank may take money from your deposit account to make a payment on a separate debt that you owe to the bank, such as a car loan, if you are not paying that loan on time and the terms of your contract(s) with the bank allow it.
They will accept the deposit if they have not closed your account. Any money they receive will be applied to your negative balance first. If you run in the negative too often, they will close your account.
If you choose to opt in to debit card and ATM overdraft, you are usually allowed to make ATM withdrawals and debit card purchases even if you do not have enough funds at the time of the transaction. However, you will generally incur fees on transactions that settle against a negative balance later.
Will a bank account automatically close if it reaches zero balance?
The short answer is that it depends on the bank's policies and procedures. Some banks may close a current account if it has been inactive for a certain period of time, such as six months or a year, regardless of the balance.
| Account | Annual Percentage Yield | Monthly Maintenance Fee |
|---|---|---|
| Navy Federal Credit Union Free EveryDay Checking | 0.01% | $0 |
| Capital One 360 Checking Account | 0.10% | $0 |
| Chase Secure Banking℠ | N/A | $4.95 |
| Chime® Checking Account | None | $0 |
You can have more of your money covered by federal insurance. By spreading your accounts around to different federally insured banks and credit unions, you can get access to having more of your money insured by the NCUA or the FDIC. You can better manage your money and build your savings.
Some don't even need to look at your credit and banking history before letting you open an account. The financial institutions we decided have the easiest bank accounts to open online included banks like Chase, Wells Fargo, U.S. Bank, Discover® Bank, and Ally, as well as financial services companies Chime® and Albert.
It's not just lump sum cash deposits that can raise flags. Several related deposits that equal more than $10,000 or several deposits over $9,800 can also trigger a bank's suspicion, causing it to report the activity to FinCEN.
