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Why Can’t I Open A Bank Account? What To Do Next
Opening a checking account is an important step to achieving your financial goals. But just like applying for a credit card or loan, sometimes a bank account application is denied. While this can be disappointing, you may still have options.
If you’ve applied for an account and the bank denies your request, here are steps you can take to find an account that works for you.
What Do I Need To Open a Bank Account?
Whether you choose to apply for a bank account online or in person, you’ll need to provide a photo ID and your personal information—and if required, an opening deposit.
Be prepared to provide these items when opening a new account:
- A government-issued photo ID. Accepted forms of ID usually include a driver’s license, a state-issued ID (if you don’t have a license) or a passport.
- Personal information. This includes your full name, date of birth, mailing address and Social Security number. You may also need to provide proof of address, such as a utility bill with your name and address on it. Noncitizens may be required to provide their Individual Taxpayer Identification Number (ITIN).
- Initial deposit. Some financial institutions require an opening deposit, usually ranging from $25 to $100, to open an account. You can make the deposit using cash, check, money order or debit card.
If you’re under 18 years of age, you’ll need to bring a parent or legal guardian to sign bank documents on your behalf.
Can a Non-U.S. Citizen Open a Bank Account?
Yes, as long as you have the necessary documents and the bank accepts an ITIN in place of a Social Security number, you can typically apply for a bank account. You’ll need to provide, at a minimum, two types of photo ID along with your ITIN.
Learn more about how to open a U.S. bank account as a foreigner and the types of ID accepted by banks.
Why Can’t I Open a Bank Account?
According to the Consumer Financial Protection Bureau (CFPB), these are the main reasons some people can’t open a bank account:
- Negative marks on consumer reports. ChexSystems and Early Warning Services are two consumer reporting agencies that track issues like unpaid bank fees, overdrafts, involuntary account closures and suspected fraud. If there are negative items in your reports, a bank may reject your checking account application.
- Errors in your consumer reports. Your report may contain errors, such as negative information from another consumer’s bank history, which could be the reason your application is rejected. If you think this is the case, you can review your reports and address any errors.
- Your bank application is incomplete. It’s also possible to be rejected if you haven’t provided the proper forms of ID to the bank or if your application contains incorrect details. If this is the case, work with a bank officer who can advise you on what to do.
- A joint account holder has bank problems. A bank may reject your application if you’ve had a joint account with someone who has negative items listed on their consumer reports.
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What To Do If Your Application Is Rejected
If your bank account application is denied, the first step is to determine why. Once you know the reason, you can take corrective action. In some cases, it may be as simple as providing a utility bill with your name and address on it or getting a government-issued ID from the local DMV.
However, if you’ve been denied a new bank account for having negative items on a ChexSystems or Early Warning Services report, you’ll most likely have to apply with a different bank or try one of these three options:
1.Open a second chance bank account.
Some banks offer second chance bank accounts, which are geared toward people with a negative banking history in their ChexSystems or Early Warning Services profiles.
While second chance bank accounts have more restrictions and fewer features—for example, transaction limits, minimum deposit requirements and no overdraft protection in some cases—they can be a lifeline for those who can’t get a traditional bank account. Once you’ve maintained this account for several months, you can usually upgrade to a regular bank account.
Here’s where to find a second chance checking account in your state, so you can open a new account and establish a positive banking history.
2.Clean up your consumer report.
ChexSystems and Early Warning Systems are consumer reporting agencies that track checking, savings and deposit accounts. If you’ve ever bounced a check or closed a deposit account with an unpaid balance, you may have a profile with one or both of these agencies.
Here’s how to remove errors or negative marks from those reports:
- Request a copy of your report. Under federal law, you can request one free copy of your ChexSystems report and Early Warning Services report every year.
- Review the reports. The reports will list all of your deposit accounts and the reason they were closed or reported.
- Take corrective action. If there are errors, you can file a dispute with the agency. However, if you owe money to a bank, you should contact them and pay off the balance. Ask for a receipt and send it to the agency, requesting they remove the item from your report.
Once your reports have been cleared, it should be easier to open a bank account.
3. Get a prepaid debit card.
Though it’s not quite the same as a checking account, almost anyone can get a prepaid debit card and use it for bill payments as well as in-store and online purchases. Prepaid debit cards are issued by banks and carry the Visa, Mastercard, Discover or American Express logo.
Prepaid cards are also handy if you want extra security when shopping or want to make sure you don’t overspend. Here’s a list of the best prepaid debit cards of 2023.
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. If it’s due to a ChexSystems or Early Warning Services profile, you can clean up your profile, get a second chance bank account or apply at another bank.
Prepaid debit cards are one workaround, but they’re not a substitute for a bank account with a full menu of services.
As of 2021, roughly 4.5% of U.S. households were “unbanked,” according to the FDIC. While that number is at the lowest point since 2009, it still leaves 5.9 million households without bank accounts. Pursuing some of these options may help unbanked or underbanked people find the services they need.
