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Chexsytems is a database that tracks individuals’ banking habits. Banks add information and check the system before approving new accounts. In this economy, banks are stricter than ever about approving accounts. If a report shows that you have overdrawn accounts or some other negative banking history,
that person will probably be denied for new accounts.
Avoid getting a negative Chexsytems report by being a smart consumer. It is important never to write checks for money that is not yet in the bank. Checks today can be submitted electronically and cleared immediately and your deposit may be held for several days before it is available.
The best tip to avoid overdrafts is to keep track of your deposits and spending on a checkbook register. Remember that your balance online or at the ATM may not reflect all outstanding charges or deposits. For those who prefer not to track every purchase, one possibility is to keep a buffer of extra
money in the checking account to cover accidental overspending. Another option is to transfer set
amount money onto a prepaid debit card. The prepaid debit card can be used for daily spending without
needing to keep track of a checking account balance.
Avoiding Chexstems is important in order to maintain a bank account for direct deposit and free check
cashing as well as to have a place to safely put savings. By being cautious about your bank account, you
won’t just avoid problems down the road, but also avoid unnecessary bank fees.
Youngandthrifty’s Take: Wow, I didn’t even know what a ChexSystem was until this guest post. Apparently 80% of banks in the United States and Canada use ChexSystems. So if you have ever been denied when opening up a bank account, then you know that there was a ChexSystem report done on you. It seems that not only do you have to worry about your credit card spending, you have to worry about your debit card spending! Life ain’t always easy, is it? I think that Money411′s example of accidentally writing a cheque for money that isn’t in the bank account happens more often than we think (I think I’ve done it in the past and kicked myself for being so silly to do such a thing)- you have to pay for a bounced cheque AND you get ChexSystem’s elephant-memory laced tentacles on you. One way to avoid this is to keep a minimum balance in your bank account. In order for my bank not to charge me $8.50 per month for bank fees, I have to keep a minimum of $2000 in my chequing account. I think this helps me keep a buffer in case I were to accidentally write a cheque and have it bounce. Although having $2000 sit there and look pretty (whilst earning 0.05% interest) isn’t ideal because you’re not really saving any money, it is better than not having any money in chequing for fast access at all…and later on pay the price of not being approved to open a bank account!
How about you, readers? Have you had the experience of accidentally writing a cheque when there wasn’t enough money in the bank account? What are your ways to prevent this from happening?
I have a system where I deposit only the amount needed for that month into my checking account. Everything else is direct deposited, so I have to be extra careful. Now the only regular expense I write check for is the rent. But whenever I give a check for non-budgeted stuff I always get nervous. And I HATE it when people sleep on checks and deposit them after 3 months. Have not found a good system to manage that…
BTW, just like credit report, you can get your chexsystems report for free too, once a year.
@Suba- Thanks for the tip- didn’t know you can get a chexsystems report. I’m the same! I hate it when people don’t deposit their checks and just have them lying around. Sounds like your system works out pretty good!
That’s really interesting … I didn’t know anything about this system before reading this post either. Good information, thanks!
@SavingMentor- Thanks, I didn’t know about it either. Life is endless continual learning ain’t it?
Awesome information as usual. I had no idea!
I’ll be more careful from now on.
@Tiny Potato- hey don’t thank me, thanks to the guest poster =) I had no idea too, the great thing about this blog is I’m learning so much (and we’re all doing it collectively as bloggers, which makes it even more awesome).
I’ve made it a point to track all of my spending and now that most bills can be paid online, I rarely use checks. I also have set up an overdraft savings account attached to my day-to-day checking account so that if for some bizarre reason I do overdraft, I have a cushion. (Of course, my overdraft account does charge me a fee if I actually overdraft, but it’s minimal compared to a normal overdraft fee.) I guess the bottom line is just don’t overdraft!