What to Do When You Can’t Open a Bank Account
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Just as an application for a credit card might not be approved, a bank or credit union could deny an account application. If this happens to you, be aware that you have other options.
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.
Of the 7 million U.S. households that don’t have a bank account, about 20% say one reason is because of ID verification, credit problems or issues with a former bank account, according to a 2019 FDIC survey. Other reasons include customer concerns about keeping the minimum bank balance and inconvenient bank locations.
If you're unable to open a bank account, here are some tips on what to do next.
What to do if you can't open a bank account
Verify your details
When you apply to open a bank account, you usually have to provide your name, address, Social Security Number, driver’s license or passport details and other personal information. Your bank will likely work with third-party companies to electronically verify your application. If the information can't be confirmed, it may lead to a denial. If you believe you may have listed incorrect data on your application by mistake, consider reapplying.
Review your consumer reporting files
It’s possible your bank may have confirmed who you are, but denied opening an account because of other reasons, such as a record of an unpaid balance from overdraft charges. Banks rely on consumer reporting agencies such as ChexSystems or Early Warning Services for information on applicant banking histories. When this information causes a denial, you have the right to receive a copy of your file.
The file could list outstanding debts from old accounts, the status of those debts (paid or unpaid) and whether a past account was closed due to suspected fraud. You can use the information from the report to contact the previous bank and pay off any outstanding fees or dispute errors. You could also file a dispute directly with the reporting agency. To reach ChexSystems, call 800-428-9623. For Early Warning Services, call 800-745-1560.
Consider other banking options
It’s difficult to have a bank account approved if you have a consumer reporting agency record. In addition, young adults and recent immigrants may not have a U.S. banking history for these agencies to verify. This may mean you can’t open a traditional account today, but it doesn’t have to stop you from accessing banking services. Here are some other options to consider.
Second chance checking
Some institutions offer second chance checking accounts specifically for customers who can’t qualify for a traditional option. The alternative account might lack some features such as overdraft protection or the ability to avoid monthly fees, but it gives customers a chance to develop a solid banking history. (Note that this option generally doesn’t involve applying for loans, so it won’t help you build a credit history.)
If you keep a second chance account in good standing for 12 months, your bank may switch it to a regular checking account. Once you reach that milestone, you could also shop around for top-notch checking and savings accounts or, if you live far from a bank branch, consider a free online checking account.
» Immigration status keeping you from opening an account? Learn how to open a bank account without a Social Security Number
Prepaid debit cards
Many prepaid debit cards let you access important banking functions, such as direct deposit, online bill pay and electronic bank transfers to savings accounts (which can help you build your savings balance). They are generally available to customers regardless of banking history. Some of the best choices have no or low monthly fees and access to thousands of ATMs.
Not being able to open a bank account shouldn’t mean not being able to access banking. Whether you resolve the account issue directly with the institution or choose to shop around, there are a number of solid financial service companies that would be happy to have your business.