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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.

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  |     |   Comment #1
I'm not so sure that this is unfair.  The whole point of these incentives is to gain new customers who will stay with the bank and use their services.  It was one thing when you would get a toaster for openeing a savings account for $25 - there was no real expectation that you would do all your banking there.  A hope maybe, but no expectation.  Since nearly all require a monthly direct deposit and use of a debit card, how many folks can sustain that for any period of time?  Seems reasonable. 
  |     |   Comment #2
For further ChexSystem infomration, see:


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.
  |     |   Comment #3
 I agree there is nothing wrong with shopping for banks as a commodity. Talk about trying to eliminate the competition and to what purpose? They may want to be wary of having expectations of long term clients in this competitive environment. One thing this attitude does is keep capital out of this banks coffers. Capital that could be earning them interest on a daily basis, no matter how long it's there.
  |     |   Comment #4
Most of the banks are looking for negative info in your file at ChexSytems to see if you will be profitable to the bank and not the other way around. If your record shows that you are absent minded and ignorant, you will be profitable to the bank and will be approved for the new account.

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.
  |     |   Comment #5
Turnabout stinks. We have shopped around for the banks that are more profittable to use; and the banks have found away to shop around for more profittable customers?  This is ethical and legal but it stinks to be excluded because of good credit and trying to get things right....
  |     |   Comment #6
I am not too crazy about having numerous reward checking accounts, because I am too lazy to keep up with it all. But I sure do think the gummy bear depiction is very clever!
  |     |   Comment #7
I admit to being a rate chaser as far back as six months ago. Of course, that left me with a number of inquiries, too. Still, I went ahead and applied at the Erie General Electric FCU, as i've previously mentioned in previous posts; they're offering 5.12% in their RCA.

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....
  |     |   Comment #8
Nothing unfair about it. Consumers have the right to do everything they can to maximize their returns. Banks have the right to do same.

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.
  |     |   Comment #9
Is what commenters are describing here why I've heard lately that some consumers are pushing for HIPAA-like protections of our consumer financial information? I know I've heard this idea thrown around relevant to the difficulties of finding a job now and potential employers rejecting applicants based upon credit checks of applicants.
  |     |   Comment #10
I am curious about the initial funding deposit. For those folks who where declined, I wonder if the initial funding is for $25,000 or higher, if the bank overlooks the ChexSystem report and approves the account.  
  |     |   Comment #11
Anonymous, #10: I have wondered just the opposite. Folks with a lower initial balance still have to meet all requirements to get the 4% rate, but the bank's absolute payout in interest is much less with, say, $2,500 in funds versus $25,000 in funds.
  |     |   Comment #13
The bank doesn't want to lose customers if it decides to lower the rate.
  |     |   Comment #14
I would question whether this is, in fact, legal.  A properly structured class action suit might well find that it is not.  Any business attorneys care to chime in?  
  |     |   Comment #15
this is why i hate RCA, too many hoops to jump through. Over time, more will be added(20 debit transaction, 2 bill pay, 1 DD, balence cap,), rates will get lower, where do we draw the line??? RIP RCA
  |     |   Comment #16
I believe legality depends on the laws of the particular state.  I contacted the Texas regulators about Viewpoint -- they told me a Texas bank could deny an account for any reason.  Actually Chexsystems should offer the customer a "pay to remove inquiry" option.  Would be a nice source of income for this wonderful company.
  |     |   Comment #17
Yes, by all means, let's try to further dictate to banks how to run their business, since that strategy is obviously working out so well for savers ... . Not! You can be certain that if they are forced to take all applicants, they will make up the cost in some other way. Maybe they would even decide not to offer the RCA at all.
  |     |   Comment #18
I totally disagree with Anter in #15.  Too many hoops to jump through?  In the current economy, where RCAs are the only outlet where you can get better than 2% on your money, I don't find it a burden to make ten or twelve debit purchases that I would normally do any way in order to qualify for the top rate from an RCA.  I actually do more each month.  And if I have to figure out how to make three bill pays a month in order to earn 4% on my money from FCLB, I'll do it.

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.
  |     |   Comment #19
Gee, I didn't realize so any others have several rca's.  I thought I was in the minority. The banks make their profits by loaning out rca deposit funds on high interest credit cards to those who don't pay their credit card balances in full monthly.  Credit card rates of 10% or more afford rca banks a nice profit

Some banks charge up to 29% apr on balances on credit cards.   Maybe I should feel sorry for the banks.
  |     |   Comment #20
Anon #19, maybe you haven't heard, but new legislation is severely curtailing banks' abilty to charge those rates, and a lot of people are just walking away from huge credit card balances or simply can't pay. This is changing the whole banking landscape and may be the death of our beloved RCAs. Other likely casualties: the free checking account and the no-annual-fee credit card.
  |     |   Comment #21
  |     |   Comment #22
#21  RCA= Reward Checking account
  |     |   Comment #23
Re # 10, Community National Bank of the Lakewood, TN, closed out 2 people I know well who each had $25,000 in rcas.  After debit card charges, they each netted $60- monthly.  I guess bank could not profit on $50,000 deposits and still pay out $120 monthly.  Or is someone trying to hold down savers?
  |     |   Comment #25
#23 -  Commercial National Bank pays 4.09% APY. That mean on $25K in deposits, they paid out maybe $85 in interest each month.  If your friends each "netted" $60 a month, that means they only spent around $25 on a minimum of 12 purchased needed to qualify.  That's averages out to a little over $2 a purchase.

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.
  |     |   Comment #24
If the bank wants me to use them as my primary account, they should endourage me to put my primary checking account there. I'm getting 4% at MB with their RCA. But, that is only paid out on $10,000. Any balance above that yields .05%. I happen to have way more than 10k in liquid assets that could be earning interest. So, in order to maximize earnings, I have to split up my cash to several banks.
Jacquie Graves, Westfield Bank FSB
  |     |   Comment #26
Westfield Bank takes great pride in our aggressive efforts to safeguard our customers. In our effort to protect customers from fraudulent cyber crimes, we have limited our applicants to five inquiries for our Dream Big Rewards accounts. We realize this may cause an inconvenience for some, however we feel that protecting our customers' safe banking environment is most important.
  |     |   Comment #27
The above post by WFB is another interesting reason for banks to accept only customers with limited ChexSystem inquiries: potential fraud.  I guess that it is reasonable to equate numerous ChexSystem inquiries to fraud and/or absue of bank systems.

Thanks, Jacquie.
  |     |   Comment #28
Jacquie Graves of Westfield Bank- There are many ways you can and do verify identities. Why do banks always use the "security" line when feeding us bull? Lol
  |     |   Comment #29
I agree with tightwad.

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.
  |     |   Comment #30
The internet is a great equalizer for those searching for RCAs.  Some banks just haven't come around to appreciating that fact.  They would rather have ignorant customers.
  |     |   Comment #31
Ignorant and non-savvy financial customers are what gives the most profit to the banks.  If everybody treated money like I am doing, banks would be out of business.
  |     |   Comment #32
I have not tried to do any of these accounts BUT I know I must have a BUNCH of inquieries over the last 18 months.  Why so you ask? 


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.
  |     |   Comment #33
I agree with #29 and Tightwad. 

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.
  |     |   Comment #34
There is a way to "pay to be off ChexSystems."  I worked at a smaller bank and we used ChexSystems to determine if an account could be opened; and during my training I was told that there was a class, at least in the state of Minnesota, that people could take if they had a bad history on their ChexSystems report.  The report will still show what the person did with their account, but it would say that they attended a class to learn to be more responsible with their money.
  |     |   Comment #35
Max, why not call the bank and tell them about it? Quite often they will make exceptions if they fully understand what you are trying to do.
  |     |   Comment #36
does anyone know, if u just want free NON INTEREST BEARING checking accounts, like do you think the banks care about how many chexsystem inquiries there are or not, since they arent paying interest, u would think they wouldnt mind as long as theirs no fraud or abuse reported to chexsytems. so anyone know or have an opinion as to how many free checking accounts do u think i could have? im thinking alot.
  |     |   Comment #38
#36: Each bank has different rules and ways to utilize ChexSystem results and it has nothing to do with RCA or free no-interest checking.  The majority of the banks simply use it as a check for usual offenses such as bounce checks, non-sufficient fund, etc.  A few banks care about the number of inquiries.  For those who only check for "bad record", the number of accounts can be large (say 10-12).

Hope this helps.
  |     |   Comment #37
If an rca a/c has $25000- abd a bank cab't afford to pay 4% interest, the bank may well be in trouble.

$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.
  |     |   Comment #39
Location: NJ

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.

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