Banks Rejecting Applicants for Having Too Many Accounts
I'm afraid many banks offering reward checking accounts have been rejecting applicants due to the applicants having too many recent ChexSystem inquiries. This has been recently reported for First Clover Leaf Bank (see comments under this post) and at Westfield Bank. A reader provided this comment about his experience with Westfield Bank:
I currently have 3 open Rewards Checking accounts and attempted to add a 4th. My application for the Westfield Bank’s Dream Big Accounts was denied with the following email explanation -- "Thank you for your interest in Westfield Bank’s Dream Big Accounts. We regret to inform you that we are unable to open an account for you at this time. A ChexSystems report, though not a negative credit report, has listed numerous inquiries for you at other financial institutions. This indicates that this request to open an account with Westfield Bank is not for your primary checking account. Our Dream Big Account products were designed to attract new deposit customers to Westfield Bank who will be using these accounts as their primary checking account. Westfield Bank's risk guidelines prohibit us from making any exceptions to this report."
Most banks will do a ChexSystem inquiry when you apply for an account. ChexSystem is intended to be used to flag applicants who have abused banking privileges at other banks such as for bouncing checks or failing to pay fees.
In my opinion, it's not fair to use of ChexSystem to flag customers who have merely applied at other banks. Just think if a similar check were made in other types of businesses. What if grocery stores shared shopping info with each other? Could you imagine a store not giving you a sale price because you recently shopped at another store? That might indicate you're not using the store as your primary supermarket. There's nothing wrong for shopping for the best prices or the best rates.
Some banks use number of ChexSystem inquiries to determine "primary" usage and/or to deter "frequent rate chasers" and "bonus humters." Fair or not, that maybe the only screening tool available (it is the business they are in!) -- debating it is futile. As stated in the FWF thread, an inquiry stays on for about six months, and the acceptable threshold is three (on the average).
I recommend that all applicants call before apply: ask about all the rules/requirements (such as debit card specifics, $5 minimum, etc.) and the rules for ChexSystem. Most banks will tell you that it is used to check negative (derogatory) information (bounces checks, etc.). Then it is safe to go into the water.
I can attest to that, my wife has all kinds of missed payments, late fees and bounced checks and she always gets approved for RCAs and she has opened 5 accounts in the last few months, myself, perfect file and only 3 requesst on file and was rejected yesterday.
Thing is, now that my place of employment is finally offering direct deposit, I've gone ahead and used this credit union to have my paychecks deposited there. I guess it's my way of thanking them for allowing me to have an account there, despite all those inquiries. They could have easily turned me down.
I believe in turnabout is fair play - both good and bad. The caveat of this account is that I have to maintain a monthly balance of $500; fair enough to me. But with this kind of rate, compound interest will go a long way, until I've reached my cap.
I also have a Kasasa checking and savings account at Aspire FCU. 3.51% RCA and a linked share account that was over 2%, but recently dropped it down to 1.01%. No minimum balance needed for the RCA.
In this climate of really bad rates, and not having a ton of liquid cash to play with, I'll take this....
Many times on this blog, people have left comments saying that if banks don't like the way people are using RCAs, they should just lay out stricter criteria up front. Well, that's exactly what they are doing in a roundabout way. FCLB could have instead required, for example, all debits must be at least $5, and 15-20 of them, and 5 bill pays, and direct deposit of at least $500, and so on. It would have had the same effect, and people would have complained just as loudly (see recent post on City Bank, Texas). Their approach is just simpler. But in all fairness, they should state their ChexSystem restriction in the account information, so that people know about it before wasting their time applying.
I applied to FCLB and, after reading comments here, fully expected to be rejected. I consider myself a moderate rate chaser. Have just one RCA (opened a few months ago), but multiple other accounts opened in the past few years for this or that bonus or introductory rate, including one just last week. But my application was accepted. So my guess is that the folks whose applications are being denied are extreme rate chasers. Again, nothing wrong with that, but I don't blame the bank for doing their best to recruit customers who they believe will help their bottom line.
I live on a fixed income and the $300 a month I earn from three RCAs is well worth a little extra effort here or there. And I'm able to do it without changing my normal buying patterns. No splitting up purchases in $1 or $2 increments.
RIP RCA? God I hope not.
Some banks charge up to 29% apr on balances on credit cards. Maybe I should feel sorry for the banks.
Banks today are wary of making loans. And if you look at CNB's finances, they have $531.71 million in deposits and only $427.76 million out in loans. That's over $100 million dollars on their books that are earning close to nothing. So for this bank (and every other one) the income they make on RCAs is the interchange fees that merchants pay them when customers use their debit cards.
So when your friends meet their qualification requirements with a minimum of under $5 purchases, why would you expect the bank to continue losing money on customers who are obviously just trying to "game the system" by actually spending less each month than the interest they are paid? For those of us who are trying to get a decent rate of return on our liquid assets, we try to spend a reasonable amount each month on normal, every-day debit card purchases so that the banks don't feel we're ripping them off in exchange for giving us the last available decent rate of return available in today's woeful financial environment.
Banks are in business to make money, and if customers like your friends continue to try to make a profit from their RCAs by making a bunch of under-$5 purchases, we will see a continued decline in rates and availability of RCAs with good rates of return.
Jacquie Graves, of Westfield Bank FSB, Your explaination is load of crap and you know it. Fraud is not the issue. It's about the potential to make money, plain and simple. A person with many RCAs and from out of state is probably looking for a place to park funds, not use your bank. Your bank is in business to make money and multiple RCA owners don't belief in giving banks charity. Your bank is free to make their rules and customers are free to park funds elsewhere, but please, don't insult our intelligence.
Because I have had accounts at SOOO many banks that have been taken over here in IL -Corus, Park National, Amcore, B of Lincolnwood, Wachovia, Washington Mutual.......and those are just the ones I can think of in 2 minutes.
As far as I'm concerned, these banks are abusing ChexSystems, which should only be used to indicate fraud and abuse of checking accounts. It's not reasonable. I found, after I was rejected for a non-RCA checking at a Credit union, that I had 10-12 entries over 2008 - 2010. Why so many? The banks added entries for each CD that I opened, and that's why the Credit Union declined my application for a fundamental checking account.
In order to get the checking acct, I alerted one of my banks of this misuse. Even though they wouldn't remove the CD entries, they instead wrote a letter of explanation to the Credit Union. The bank has stopped creating entries in ChexSystem for CD's as of 2010 and the Credit Union granted me a checking acct.
By the way, my only debt is a mortgage...and I have a great credit score.
Hope this helps.
$25,000- loaned out at 10% on credit cards to good payers leaves 5% profit after expenses. It's volume that counts. On the other hand, if I were the bank, I'd not want to pay any interest on checking a/cs. I'd
want it all for my bank. The heck with the hoi polloi.
The above 9/16/2010 post/comment by bank deals guy truly mirrors my situation and experience. Westfield bank just denied my application for a new account.
"A ChexSystems report, though not a negative credit report, has listed numerous inquiries for you at other financial institutions. This indicates that this request to open an account with Westfield Bank is not for your primary checking account. Our Dream Big Account products were designed to attract new deposit customers to Westfield Bank who will be using these accounts as their primary checking account. "
I currently have 3 open bank accounts and will soon be forced (thank you danvers bank) to drop one of the accounts. I was looking to add a 3rd account.
I called the westfield bank rep, (Mrs. H.) whose name was on the email. westfield bank (800-368-8930). She advised me that they interpret numerous chex inquiries to indicate a high potential for fraud. I don't really understand that point. What fraud am I about to commit? I just want a bank account!
She also explained that their bank only wanted customers who are "not" rate chasing. She advised me that my chex report indicated that I was rate chasing. Of course I'm rate chasing! isn't everyone?
anyway, my experience appears to mirror other applicants.
a post from 9/17/2010: "Fraud is not the issue. It's about the potential to make money, plain and simple. A person with many RCAs and from out of state is probably looking for a place to park funds, not use your bank. Your bank is in business to make money and multiple RCA owners don't belief in giving banks charity."
It would appear that there is a growing trend of snobby banks whom don't want depositors money if the depositors goal is to chase high interest rates. Mrs. H advised me that they don't want new customers who are just going to open and close accounts, based on the bank's interest rate.