What To Do If You Can’t Open A Bank Account

If you can’t open a bank account, you’re not alone. Some consumers are unable to open a checking account because of problems with a past bank account, such as suspected fraud, mistakes in their checking account report or having a past account closed by a bank due to an unpaid negative balance.

Find out why you were rejected

If your bank account application has been turned down, determine the reason for this so you can fix any problems and successfully obtain an account. Reasons you may be turned down for a bank account include:

• History of involuntary account closures: You may have had an account closed by a bank in the past due to a negative balance, bouncing checks, unpaid fees or suspected fraud. If you had a joint bank account with someone else who had these issues, this could also prevent you from opening a new account.
• Errors: You could be denied a bank account due to errors, such as a misspelled name or incorrectly typed social security number.
• Identity concerns: If your bank account application contains suspicious information or even typos, this could flag your application as potentially fraudulent.

If you’re unsure why your application was denied, contact a bank representative for more information. Once you know the reason, you can try and resolve any problems before you decide to apply again. The bank may simply need more information, or you might need to resolve an error or clear up a more serious issue.

If a bank denies your bank account application based on information from a checking account reporting company, it is required that the bank give you the name of the reporting company that supplied the information. You can then find out what’s on your report by requesting a copy from the reporting company.

Consider a different bank

After finding out why a bank rejected your application, try working with a different bank. Banks and credit unions across the country have different rules when it comes to application approval. Some banks require you to pay any outstanding bank account fees before allowing you to open a new account.

If you have information on your checking account report that may prevent you from being able to open a new bank account, consider going with a bank that doesn’t look at your report for its application decisions.

Clear up your checking account report

Companies such as ChexSystems and Early Warning Services collect and report on negative information associated with consumers’ bank accounts. Banks may look at these reports when deciding whether to approve account applications, and possible red flags include bounced checks, unpaid fees, suspected bank account fraud or having an unpaid negative balance in a past bank account that prompted the bank to close the account.

If you’ve been denied a new bank account, you may want to view your checking report and work to clear up any problems. The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to provide these reports to consumers free of charge, upon their request, once every 12 months.

Verify your details on the application

When you apply for a bank account, you’ll typically need to provide information including your name, address, date of birth, Social Security number and driver’s license or passport details. If you’ve entered any of this information incorrectly, the bank might be unable to identify you and deny your application. If you believe this is what happened, consider reapplying for the account.

Consider other options

It might take some time before you can obtain a standard bank account. In the meantime, you can make use of alternative banking products.

Second-chance checking accounts

A second-chance bank account functions much like a traditional checking account but with some account restrictions. With a second-chance account, you may need to pay a monthly fee.

Various financial institutions either offer an account with “second-chance” in the title or state that they don’t use reporting agencies when reviewing account applications. These include:

• Chime: When you apply for a bank account, Chime doesn’t do a credit check or look at your ChexSystems report. Nor do Chime accounts charge a monthly fee or require a minimum balance.
• Varo Bank: The bank account application process at Varo doesn’t include a ChexSystems screening, and customers have no monthly fees or minimum balance requirements.
• Wells Fargo: Clear Access Banking is a checkless account that’s described by the bank as “for customers unable to open standard accounts due to past credit or banking history.” It comes with a debit card and charges a $5 monthly service fee when requirements aren’t met.

When opening a second-chance bank account, you may wish to find out about the transition process to a regular checking account. Some banks have clear guidelines that can help you switch over to a regular checking account at some point.

Prepaid cards

If you’re struggling to open a bank account, a prepaid card can be a good alternative if you don’t want to pay with cash but lack access to a checking account. Prepaid cards must be front-loaded (monetary value added to them) before they can be used for purchases.

In 2023, 5.9 percent of U.S. households used reloadable prepaid cards, according to a survey from the Federal Deposit Insurance Corp. (FDIC). An advantage of prepaid cards is they can’t be overdrawn, so you won’t incur overdraft fees. However, many prepaid debit cards have other fees, including a monthly fee, activation fee, transaction fee and more. Another downside is prepaid cards won’t help boost your credit score, since they don’t grant you a line of credit.

Money orders

Money orders can be used as an alternative to writing checks. These paper documents can be purchased without a bank account, and they’re commonly available from banks, grocery stores and post offices. In purchasing a money order, you’ll pay the full amount up front, plus a small fee, and the issuing party guarantees the funds to the recipient.

Generally, money orders can be purchased for any amount, often up to a set limit imposed by the issuing institution. For instance, the post office allows you to send up to $1,000 in a single order to anywhere in the U.S.

Check cashing services, when used with caution

If you don’t have a checking account and need to cash a check, you could resort to check-cashing services. These services are typically offered through storefronts or retailers, and you’ll often pay a fee, either as a percentage of the check amount or a flat fee. These fees can often be considerable, so it’s a good idea to compare the amounts when deciding upon a provider.

Bottom line

A bank account can be a doorway to financial success. If you cannot open a checking account, there are still options available. Although it may take time to clean up your banking history, it can be done with the right steps.