Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

No checking account blues

Dear Dr. Don,
I am a 24-year-old single parent and a student. I had a checking account, but the bank closed it. Now I can't open a new account with another bank because of this account closing. What can I do? The only way I can save money is if I have a bank account, and it is hard trying to cash my paychecks.
Carla Checking

Dear Carla,
People understand how a bad credit report can hurt their ability to get credit but don't consider what a bounced check or other banking calamity can do to their banking relationship.

There are consumer-reporting agencies that monitor your banking history. A bad banking report can affect your ability to open any type of bank account, but especially a checking account. Negative information, like a non-sufficient funds, will stay on this report for five years.

ChexSystems is the most widely known agency for reporting banking relationships. You can order a copy of your report from them. If you have been declined a banking account within the past 60 days, the report will be free.

If you haven't been declined as a bank customer, the price you pay for the report varies by state. It's always free for residents of Colorado, Georgia, Maryland, Massachusetts, New Jersey and Vermont. It's always free if you are on public assistance. It's always free if you are unemployed and planning to seek employment in the next 60 days. It's always free if you believe you are a victim of consumer fraud. Other than that, Maine residents pay $3, Connecticut residents pay $5 and it's $8 for everyone else.

As a consumer-reporting agency, ChexSystems has to follow the Fair Credit Reporting Act, which gives consumers the right to dispute information on their consumer reports. You also have the right to put a personal statement on your report if the reinvestigation of a disputed item isn't resolved to your satisfaction. Be brief (less than 100 words) if you chose to make a personal statement because the agency has the right to summarize your statement in future releases of your report.

When you've paid off any outstanding claims on your closed account you want your report to note that "all amounts owed have been paid." If you've repaid the bank and your report doesn't reflect that payment, then you need to follow up with the bank and request, in writing, that they submit this information to ChexSystems.

For an irreverent look at ChexSystems along with help on finding a bank that won't turn its nose up at your business solely on the basis of a bad report, take a look at the ChexSystems Bites site. There are banks out there that won't rely solely on a consumer-reporting agency report. This site can help you seek them out.

If you're eligible to join a credit union, then start your search for a new banking relationship with them. Your school may have a credit union that you can join.

Some banks in your town may offer alternatives to account relationships where you can direct deposit your paycheck to this non-account and then access your money through the bank's ATM machines. This service is similar to the Electronic Transfer Accounts that financial institutions provide for non-account holders who receive federal payments. It's not as convenient as a checking account, but it beats the heck out of paying a check cashing service.

Your company's payroll department will be able to tell you if its bank offers that service -- an example of which is Bank of America's Cash Pay. Your employer may also have a provision in its banking contract that addresses whether the bank will charge a non-customer employee to cash a paycheck. The folks in payroll will know the answer to that question too.

-- Posted: May 22, 2002