We have all heard of credit reports from companies like Equifax, Experian, and TransUnion. If you don’t pay your bills, your credit score may drop. If you have a low credit score, you may not qualify for new loans.
Fewer people know about the consumer reporting organizations that track customers with a negative checking account history. This history is managed through companies like ChexSystems, EWS, and Telecheck. If you have bounced a check with a retailer or did not pay off a checking account with a negative balance, then you may have a negative mark on your checking account history. As a result, you may have difficulty writing more checks to retailers, and you may be blocked from opening a new checking account with certain banks.
For the purpose of this article, we will focus on the largest check history reporting company, ChexSystems (a.k.a. Chex), which is used by 80% of banks in the United States.
25 Banks That Don’t Use ChexSystems
If you have never heard of Chex — congratulations, this likely means you’ve never bounced a check or let a negative checking balance age. But for the rest of us who have not had a squeaky clean checking account history, we need to learn more about overcoming a negative Chex report.
One of the most common questions asked is: “What Banks do not use Chex?” In other words, your relationship with a previous bank has ended poorly, so are there still banks out there that will open an account for me?
Below is a list of 25 banks that either do not look at a person’s Chex history when opening an account, or the bank has a “second chance” checking product designed for individuals with negative checking history.
For your convenience, this list has been divided into Online, National, Regional, and Local banks. Under each section, the bank names simply appear in alphabetical order.
Online-Only Banks That Don’t Use ChexSystems
- Capital One (No Chex)
- Chime (No Chex)
- GO2 (No Chex)
- GoBank (No Chex)
- LendingClub Bank: (2nd) Essential Checking Account
- SoFi (No Chex)
- Varo (No Chex)
National Banks That Don’t Use ChexSystems
- Bank of America: (2nd) Safe Balance Account
- PNC: (2nd) Foundation Checking
- SunTrust Bank: (2nd) Essential Checking Account
- US Bank: (2nd) Easy Checking Account
- Wells Fargo: (2nd) Clear Access Banking
Regional Banks That Don’t Use ChexSystems
- Fifth Third Bank: (2nd) Express Banking
- First Financial Bank: (2nd) CLEANslate Checking
- Navy Federal Credit Union (No Chex but military only)
- Webster Bank: (2nd) Opportunity Checking
- Woodforest National Bank: (2nd) Second Chance Checking
Local Banks That Don’t Use ChexSystems
- 1st Convenience Bank (No Chex)
- Bank of the Ozarks: (2nd) Pathway Checking
- City National Bank: (2nd) Bounce Back Checking
- Fort Sill National Bank (No Chex)
- Premier Bank: (2nd) StartFresh Checking
- Renasant Bank (No Chex)
- Republic Bank: (2nd) Checking Builder
- Southwest Financial Federal Credit Union (No Chex)
The above list, especially the Local Banks section, is not exhaustive. It is best to research which banks are in your local area and then research their account opening policies.
Don’t give up too easily: According to the National Consumer Law Center, only 25% of banks will automatically decline anyone with a poor Chex history. But 50% of banks require the branch manager to approve or decline a risky new account request. There are many stories out there of folks who got approved at the bank of their choice despite their poor checking account history, most likely because a local branch manager chose to approve the customer.
We recommend walking into a branch and asking the manager what your chances are of being approved.
What is ChexSystems?
ChexSystems (Chex) is a consumer reporting agency that keeps a record of American consumers who have had a negative checking account history with a participating bank. This negative behavior includes:
- Unpaid negative balances
- Bouncing checks
- Suspected fraudulent activity
When a consumer wants to open a checking account with a new bank, Chex will share the consumer’s negative checking history, so that the new bank can decide if they want to take on that person as a new customer. Chex is a system that is funded by banks to help the banks manage risk, and is used by nearly 80% of banks in America.
How Does ChexSystems Work?
There are certain behaviors that “upset” banks. When a bank gets upset at a customer, they can tell Chex to make an update to the customer’s negative account history.
Each bank creates its own rules for what makes its bank upset. It is challenging to give detailed specifics about a bank’s rules because they are seldom made public. Generally, the following types of activities get reported to Chex:
- Unpaid negative balances: Your account slips into the negative, and Overdraft fees probably make you even more negative. If your account stays continuously negative for 30-60 days, your account will likely be closed by the bank. Nearly 98% of bank closures reported to Chex are due to unresolved negative balances.
- Excessive bounced checks/overdrafts: You have exceeded what the bank believes to be a reasonable number of bounced checks or overdrafts.
- Accounts closed for cause: You have done something suspicious and the bank thinks you have committed fraud.
- Debit card/ATM abuse: You have done something suspicious at the ATM, such as depositing empty envelopes.
- Excessive account applications: You applied for multiple new checking accounts across different banks in a short period of time, which may be a sign of fraud.
- Excessive loss of checks/debit cards: You suspiciously keep reporting checkbooks or debit cards as lost/stolen
- Suspected fraud or identity theft: You are using the account for criminal activity.
Everyone is familiar with the concept of a credit score or FICO score. Chex produces a similar QualiFile score. Once all of your banking transgressions have been compiled, the company assigns you a QualiFile score ranging from 100-899. Chex does not make its scoring formula public, and banks do not publicize what score they consider acceptable or not.
Reminder, the best score may be no score. If you have had no negative account history then Chex will not have any data to compute a score for you.
When a potential new customer applies for an account, the bank will pay for a Chex report on that customer. Using the QualiFile score and Chex data, the bank will make a decision as to whether you are too risky to become their customer.
According to the National Consumer Law Center, 25% of banks will make an automated approve or decline decision. While 50% of banks require the branch manager to look over the Chex history and make the final judgmental decision.
Why is ChexSystems Controversial?
Chex, a system that was originally built to identify financial criminals (intentional, repeat check fraud), has slowly been expanded over the last few decades and now holds negative records against 19 million Americans. Using Chex data, banks deny new checking accounts to an estimated 2 million people each year.
After the 2008 financial crisis, regulators began to put pressure on banks regarding what some see as a predatory practice — gleefully allow customers to overdraft, charge a huge amount in overdraft fees ($14B per year), and then penalize customers who can’t pay back those fees in a timely manner.
Government data shows that 80% of the overdraft fees were being absorbed by just 8% of banking customers. And, whether intentional or not, most of the fee burden falls on the poor and minorities. Some have called the use of Chex the equivalent of modern-day redlining (the discriminatory practice of denying financial services to certain locations based on ethnicity or race).
In addition, companies such as Chex have been partially blamed for the fact 25% of American households (63 million adults) are unbanked or underbanked. When a customer is denied a bank account due to a Chex report, that person often turns to much more expensive and predatory alternative financial products such as payday loans.
Based on regulator pressures, and an eagerness to reach an untapped market of 63 million potential customers, there has been an increase in the number of banks offering Second Chance checking products.
What is Second Chance Banking?
Second Chance Banking are checking account products specifically designed for potential customers that have a negative history in the Chexsystem. This is a relatively new “innovation” in the banking industry, created in reaction to the pressure banks have been receiving to service the unbanked/underbanked in America.
Second Chance checking accounts are usually slimmed-down versions of the bank’s normal checking product. The precise terms vary spending on the bank, but in general, these products have some of the same benefits as a standard checking product. These benefits include: access to a debit card, access to ATMs, direct deposit, and access to online/mobile sites.
However, the Second Chance products also have some drawbacks over a normal checking product, such as: no access to paper checks, monthly fees, no ability to overdraft (leading to more declines and bounces), restrictive caps on spending/deposit/withdrawal limits, and lack of extras services like Billpay.
Of course, it is worth saying again that the main reason to choose a Second Chance product is simply that you are unable to qualify for a standard checking product.
Second Chance accounts can get you started at a major bank, and are much better than predatory alternatives like payday loans and check-cashing services.
Second Chance Banks vs Non-ChexSystems Banks
A Second Chance bank offers potential customers with a negative ChexSystems history a slimmed-down version of their normal checking product.
A Non-ChexSystems bank offers their normal checking product to everyone and skips the Chex review.
Normal is usually better than slimmed-down, so we would recommend looking for a Non-ChexSystems bank before choosing a Second Chance bank. It would also be worth your time to speak to the branch manager at a traditional bank, to see if they are one of the 50% of banks that allows their manager to override a bad Chex history.
Benefits of Banks That Don’t Use ChexSystems
The benefit of choosing a bank that does not perform a Chex history on potential new customers is pretty obvious — you get access to a full checking product despite your past mistakes.
The Downside of Banks That Don’t Use ChexSystems
The downside of looking for a Non-ChexSystems bank is that there just are not that many of them around; only 20% of banks do not use Chex. In our list of 25 Banks That Don’t Use ChexSystems, there are six online banks, zero national banks, zero regional banks, and four Local banks. While this is in no way an exhaustive list, especially the local bank section, we can get a sense that to find a Non-ChexSystems you will need to go online or look local.
Online banks offer customer-friendly terms and a nice web/mobile app on the latest technology. However, you will never be able to walk into a local branch to deposit cash, and it can be difficult to order a special product like a secure/cashier check. In general, reaching a human on the phone can be a frustrating endeavor.
Local banks provide the warm customer service that online banks cannot. If there is ever a problem, you have someplace to walk into to discuss. Unfortunately, local banks seldom have the deep pockets of a rich mega-bank and may be lagging in their technology offerings, with clunky websites and apps, frequent downtime, and a lack of integrated services like Billpay and Zelle.
At the end of the day, choosing a bank comes down to personal preferences. Do some research, read some reviews, and decide what type of bank is right for you. Folks with bad Chex history will simply have fewer options to choose from and may have to sacrifice some preferences in order to obtain a new checking account.
Summary of Banking Options for People with Bad ChexSystems History
Here is a summary of your banking options if you are one of the 19 million Americans that have a negative history in ChexSystems:
- Try a traditional bank — there is no harm in trying two or three traditional banks and see what happens. You may get surprised. After all, the algorithms used inside Chex and the banks are not public, so we don’t know for sure what risk factors a bank is looking at. Walk in and talk to the local branch manager to see if they think you have a chance of being approved.
- Find an online or local non-Chex bank — Make a list of options that are must-haves (e.g. the ability to walk into a branch, a high tech website, etc.). Find an online or local bank that does not run a Chex review and best meets your needs. Just realize only 20% of banks avoid Chex reviews, so your options may be limited.
- Second Chance product at a national/regional bank — If you are unable to find a non-Chex bank that meets your needs, then your last resort is to sign up for a Second Chance account at a traditional bank in your area. Again, do your research because each bank has different options and terms for you to consider.
How Long do you Stay in ChexSystems?
Negative marks will stay on your ChexSystems report for 5 years.
Making payments on an old debt does not reset the Chex clock (does not restart your 5 years). Credit bureaus reset (reage) the clock based on certain activities, but Chex does not.
How Can I Tell If I Am in ChexSystems?
Just like credit bureau reports, Federal law says that consumers are allowed to get one free copy of the Chex report every year, and/or every time they are denied a product at a bank due to what is on their Chex report.
We recommend customers get in the habit of pulling their credit reports and Chex reports once a year; set a reminder on your calendar and then pull them all at the same time.
Copies of your Chex report can be ordered on the Chex website.
How to Get Out of ChexSystems?
Once you have pulled a free copy of your Chex report and confirmed there is negative information on it, there are steps you can take to get this negative information removed, or at least make it less negative.
ChexSystems is formally designated as a consumer reporting agency, and as such, is forced to play by the rules of the Fair Credit Reporting Act (FCRA). These are the same standards applied to normal credit reporting bureaus, so the recommendations for cleaning up a Chex report closely resemble the steps to take to raise your credit score:
- Dispute any errors: If you find any information on your Chex report that you feel is inaccurate, you have the right under FCRA to initiate a formal dispute. Visit the Chex website to file a dispute, and they are legally required to research and fix any mistakes within 30 days. Please note, Chex is not legally required to agree with you, and may decline to make any changes,
- Pay off or settle your debts: If you legitimately owe money to a previous bank, it might be a good idea to pay them fully or negotiate a settlement for less than the full balance. This will make your report look less negative. Please note, paying or settling an account is not a guarantee that other banks will start accepting you; it just gives you a better chance.
- Ask the old bank to remove your Chex record: After you have paid the debt owed, send a letter to the old bank asking that they consider removing their record of you from Chex. In the credit bureau world, this strategy is known as Pay-and-Delete. Please note, the banks are under no obligation to remove your record, and doing so is a grey area under the FCRA. But it doesn’t hurt to ask.
- Wait the 5 years: After 5 years from the date it was originally submitted, the record should automatically drop from the Chex report. This is the only option you can have confidence in actually working; you just have to survive the 5 years with a negative Chex report. FYI (good news), making payments on an old debt does not reset the Chex clock (does not restart your 5 years). Credit bureaus reset (reage) the clock based on certain activities, but Chex does not.
Repairing a negative Check report takes time and energy, but doing so may result in enough positive improvement to get you qualified for a checking account at a traditional bank.
How to Dispute ChexSystems?
ChexSystems is designated as a consumer reporting agency, and as such, is legally bound to the rules of the Fair Credit Reporting Act (FCRA). One key aspect of this regulation is providing customers the right to formally dispute inaccurate information found on their credit bureau or Chex reports.
File a dispute by visiting the Chex website. Chex will have 30 days to research your dispute and fix any errors. Chex may also decline your dispute and insist their information is accurate.
Does ChexSystems report to the Credit Bureau?
No, there is no connection between your Chex report and your credit bureau report.
What Banks Do Not Use ChexSystems in California?
California residents may open accounts on an online bank that does not use Chex, such as:
- Capital One
Or California residents can use a National bank that offers Second Chance banking, such as:
- Bank of America
- SunTrust Bank
- US Bank
- Wells Fargo
Finally, California residents can find a local bank near them that offers Second Chance banking, such as:
- Alta Vista Credit Union
- American United Federal Credit Union
- Bank of the Sierra
- Bank OZK
- California Coast Credit Union
- E-Central Credit Union
- Foothill Credit Union
- Fort Sill National Bank
- Los Angeles Federal Credit Union
- Mid Cities Credit Union
- Navy Federal Credit Union (military only)
- Premier America Credit Union
- Priority One Credit Union
- Self-Help Federal Credit Union
- Southland Credit Union
- Strata Credit Union
- Union Bank
- US Bank
- Ventura County Credit Union
Does Bank of America Use ChexSystems?
Yes, Bank of America uses ChexSystems when considering a potential new customer.
If you have a negative Chex history, and you are eager to open a Bank of America account, consider enrolling in their Second Chance product: Safe Balance Account
Does Chase Use ChexSystems?
Yes, Chase uses ChexSystems when considering a potential new customer.
Chase does not have a Second Chance product. The best they offer is a Pre-Paid Card.
Does Wells Fargo Use ChexSystems?
Yes, Wells Fargo uses ChexSystems when considering a potential new customer.
If you have a negative Chex history, and you are eager to open a Wells Fargo account, consider enrolling in their Second Chance product: Clear Access Banking
Does Chime Bank Use ChexSystems?
No, Chime and some other online-only banks do not use ChexSystems when considering a potential new customer.