Can I open a new checking account with bad credit?

[BrokeIn2011]

Due to the current economy, I fell behind in about 95% of my bills, starting spring of last year, due to being unemployed and not being eligible for unemployment insurance. Before my financial troubles started in spring of last year, I had a 730 FICO score, but now my FICO score is in the dumps (below 500).

I have managed to keep a checking account during my current turmoil, however just this month, my bank is now charging me $9 per month for a checking account. So now I have to try to get a new checking account. Since I am underemployed, where I only am able to find about 5 hours of work per week, needless to say, $9 a month is a hardship for me to pay. Yet I know that every time you open a checking account, they will do a credit check. Though I do not have any bounced checks to my name, I am just wondering if I go to a bank that still has free checking, will they decline to open a checking account for me?

Also, over the past 12 months, I have had 4 checking accounts closed (closed by the bank), due to the fact that I was unable to keep a balance in any of them to cover the monthly account fee (3 were business checking accounts, and one account was a personal checking account), yet I never bounced any checks on these accounts, however along the way, there came a day where there was insufficient funds in the accounts to cover the monthly account maintenance fee . . . so the banks closed the accounts after several months of me ignoring their letters.

[mountanddo]

If you don't have enough money to cover the administrative fee can I ask why you need a checking account? You could cash your checks at Walmart for $3.00 and then you wouldn't have to worry about it. Usually when you open a checking account you have to put a minimum amount in but I'm not sure what that would be. It might be easier to pay any bills you have with money orders. I got a money order at my local grocery store for .79 cents. The fees to cash checks and use money orders might be added cost but right now that might be your best option. I don't know if they check your credit but they may check to see if you have any other checking accounts and since you didn't close the accounts on your own I'm not sure if that might be a negative mark that they could someone find out about.

[alaskathryn]

Have you looked into a local credit union? Membership is generally $5 and most offer free checking.

[BrokeIn2011]

Thank you Mountanddo, and Alaskathryn.

I still need the checking account to pay bills, because it makes it easier to pay bills when I can electronically in most cases, as I don’t need a paper check, I just need the routing number and my checking account number. Though I am underemployed, I can still put enough money in the account each month to pay my bills that I can pay, yet that $9 a month I have to pay now, would have gone either for food or gas or for both.

I really can’t use Walmart as an option, because the closest one to me, is about 15 miles away. Since I do not have any other business dealings in or near the area where Walmart is located, I would end up burning up time and gas to do a round trip to Walmart to cash a check. In my neighborhood, most money orders cost between $1 to $1.50 each. Yet you are right, the fees to cash checks would be an added cost. MAJOR FROWN!!!

Yet from reading some of the other answers I have read to my question in another forum, I really have messed up BIG TIME, because due to ChexSystems, I probably will never be able to open another checking account again, due to the banks closing 4 of my checking accounts in the past year. MAJOR FROWN!!!

However, any financial institution using ChexSystems, the information that they get from ChexSystems will provide them with all of the information about all of my prior checking accounts that are negatively impacting me. For now, I will do what I can to hold onto this checking account. Hopefully my work will pick up and the $9 monthly account fee will one day be not so hard on me. I do not have a minimum balance requirement on this account, but I think in order to get the monthly $9 fee waived, I would have to keep a minimum of $1,000 in the account.

Thank you both, I greatly appreciate your help.

[dem]

I think all you need is usually a minimum opening deposit of around $100, but this may vary. Don't believe your bad credit would really matter at most banks.

[Logan]

Banks don't do credit checks to open checking accounts, they check for bounced checks. There are plenty of no fee online banks you could try.

Good luck!

[mountanddo]

One way I got around the $9.99 month fee was to have direct deposit AND open a savings and have $100 transferred on the 15th of the month to it from my checking. I just transferred it back in to my checking the next day. Of course that takes a bit of planning on your part to have the $100 in the checking account to transfer. I'm not sure what happens if you don't have the funds because that never happened to me. I just recently closed my savings account because I am trying to keep as little in my checking in case my account gets seized. My attorney says that if I file within 45 days of a summons that won't happen but I'm not taking any chances. So right now I am paying the fee. Hopefully after I file in a couple of weeks I can reopen my savings.

[bcohen]

Of course banks are trying to cram Direct Deposit down everyone's throat, and are using the ploy of reducing or lowering the "monthly maintenence" fee if you have DD. Banks know that with Direct Deposit, you are pretty much "stuck" using their bank--no matter how much they piss you off--plus they don't have to worry about getting their fees paid. Even if it happens that the fees make the account go negative, they know that there's always money coming in to suck their fees out of. On the other hand, without DD, a person might rationally "walk away" from their overdrawn account--especially if the fees were part (or all) of the reason for the account becoming overdrawn in the first place!

Personally, I would never agree to Direct Deposit under any circumstances, nor would I pay for the "privilege" of keeping my money in a bank. Fortunately, I have checking and savings at a local credit union, which not only doesn't charge any maintenence fees, but they pay me a small amount of interest on my balances each month.

In addition to the credit union, where I keep most of my money, I also have a checking account at Wells Fargo (it used to be World Savings, which then got swallowed by Wachovia, which then got swallowed by WF). Anyways, my account had always been free, but then back in June, I got a letter saying that the account would begin charging a $10 monthly fee, which could be reduced to $8 if I agreed to not receive statements, or waived if I signed up for Direct Deposit. As I am now a full-time student in a 4-year university, I was able to convert my account to a college student account which has no fees. Otherwise, I would have simply closed it and gotten an account at another credit union. Paying $10 a month to keep $300 to $500 in an account just so I can have a debit card to buy gasoline and make small online purchases is crazy. I am also not employed at this time, so I couldn't get Direct Deposit even if I wanted to (which I'd never do).

[bcohen]

Oh, and to answer your original question, if you have documentation (i.e. printouts of statements) to show that the reason your previous account(s) were overdrawn were due to things not initiated by you, then you can probably convince a bank or credit union to grant you an account even if you were reported to Chex Systems. A bank or CU might open an account for you and then close it later though, so you may have to appeal to the branch manager/board of directors if that occurs.

I know that back in August of 2008, I received a letter in the mail from a bank that I had had an account with when I lived in Illinois stating that my account was overdrawn and if I didn't pay the balance in 30 days it would be closed and reported to Chex Systems for "account abuse" which would supposedly "make it difficult" to open an account at another institution. I had in fact not used the account in years, didn't receive statements for it anymore, and didn't even live in or near Illinois at the time. I had an Ebay and Paypal account which were linked to this account, but I had deleted the account and added my new debit card when I moved to Arizona.

Anyways, the debit card expired and got declined, so Ebay billed the fees to this account, causing it to become overdrawn and incur overdraft fees and negative balance fees totalling about $150 even though the actual principal balance was less than $12.

I called the bank to complain, and they refused to do anything unless I physically came to their branch and filed a "fraud affidavit" which I couldn't do since I live in Arizona and they are in Illinois. So I went to a local credit union and opened a new checking and savings account to "pre-empt" the threat, since I had not yet been reported to Chex Systems and my credit was still ok.

I let the overdrawn account charge off and go to collections, and when I was contacted by the collection agency, I sent a DV letter. Then when they called, I disputed it vigorously and told them bluntly that I would never pay and to never call me again.

Anyways, the credit union apparently subscribes to some service that alerts them to changes in customers' Chex Systems file, because after having the account open for 2 months, suddenly I got a letter from the CU sent Certified Mail stating that due to the fact that I had an account closed for "account abuse" at another institution, they were going to close my checking account, cancel my debit/ATM card, and only accept cash or payroll/government checks for deposit into my savings account. I decided to contest this, and went to the CU's main branch and asked to speak to the manager, who then referred me to the fraud manager, who I then spoke to and explained the situation and provided documentation of the circumstances of the alleged overdrawn account. Based on the fact that I had not initiated the transaction in question, the fraud manager agreed to reopen my checking account and remove the deposit restrictions from my account.

Even though my credit has really turned to sh#t because I quit paying on all my unsecured debts back in March of 2009, I never had any further issues with the credit union.

[Logan]

Of course banks are trying to cram Direct Deposit down everyone's throat, and are using the ploy of reducing or lowering the "monthly maintenence" fee if you have DD. Banks know that with Direct Deposit, you are pretty much "stuck" using their bank--no matter how much they piss you off--plus they don't have to worry about getting their fees paid. Even if it happens that the fees make the account go negative, they know that there's always money coming in to suck their fees out of. On the other hand, without DD, a person might rationally "walk away" from their overdrawn account--especially if the fees were part (or all) of the reason for the account becoming overdrawn in the first place!

Personally, I would never agree to Direct Deposit under any circumstances, nor would I pay for the "privilege" of keeping my money in a bank. Fortunately, I have checking and savings at a local credit union, which not only doesn't charge any maintenence fees, but they pay me a small amount of interest on my balances each month.

In addition to the credit union, where I keep most of my money, I also have a checking account at Wells Fargo (it used to be World Savings, which then got swallowed by Wachovia, which then got swallowed by WF). Anyways, my account had always been free, but then back in June, I got a letter saying that the account would begin charging a $10 monthly fee, which could be reduced to $8 if I agreed to not receive statements, or waived if I signed up for Direct Deposit. As I am now a full-time student in a 4-year university, I was able to convert my account to a college student account which has no fees. Otherwise, I would have simply closed it and gotten an account at another credit union. Paying $10 a month to keep $300 to $500 in an account just so I can have a debit card to buy gasoline and make small online purchases is crazy. I am also not employed at this time, so I couldn't get Direct Deposit even if I wanted to (which I'd never do).

How about having DD to avoid fees and spend less money than you make so you'll never be overdrawn and charged fees for lack of funds?

[BrokeIn2011]

Thanks Everyone for your wealth of information. You all have certainly given me much more food for thought.

If I am not mistaken, every time a person opens a checking account, their personal credit report is pulled or is subject to be pulled. Or that has been the case every time I have opened a checking account. Along with that, it seems that most financial institutions check ChexSystems, which is basically another version of a credit report, that tests your checking account worthiness for negatives that have happen to your past checking accounts . . . i.e. bounced checks. Yet I am not sure “if” or “how much” a credit report weights in regards to trying to open a checking account.

I can’t have direct deposit, since I get paid as an Independent Contractor, so I do not have a regular or steady pay check from any "one" company that I work for.

Special thanks Bcohen for sharing as much as you did. It sounds like you have been through quite an ordeal. I am glad that things are working out better for you nowadays.

Thanks a MILLION Everyone!

[IamOld]

Brokein2011 - there MAY be an alternative...if you open a BROKERAGE (not checking!!!) account with Etrade AND can put in a $1,000 even for just ONE day, they automatically will send you a checkbook and ATM card...(this is NOT through their "bank" but Etrade itself). So (from what I was told) you don't NEED to keep $1,000 there EVER except for ONE BUSINESS DAY.

[BrokeIn2011]

Thank you IamOld, this is something great for me to also consider. I appreciate the suggestion and help.