What is ChexSystems?

ChexSystems is an association of financial institutions which develop a database of delinquent customers. The purpose of ChexSystems is to help limit fraud and ensure that only financially responsible people can open and maintain a checking account.

Member banks of the ChexSystems network (which compromises roughly 80% of all banks in the United States) report on their customers who exhibit poor financial management skills, and being on file in the ChexSystems can be financially damning.

The policy banks use for reporting customers to ChexSystems vary between institutions and the reason usually given is “closed for cause.” This reason is very vague and can mean anything from serious fraud to multiple overdrafts.

Unlike credit scores, ChexSystems is more of an absolute than a score: if you’re on it, you’re more than likely going to be denied opening an account at a major institution – for the next seven years.

So, keep your financial future in mind when you write your checks and pay your bills: getting reported to ChexSystems can be very damaging and seriously limit you for the next several years.

[tags]chexsystems, chex systems, telecheck[/tags]