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Bouncing checks? You may have C-ADD (Checking Account Deficit Disorder)

Dear Debt Adviser,
I've made a terrible mistake, one I wish I could take back. Unfortunately, there doesn't seem to be anything for me to do. A few years ago, I had an overdrawn checking account by about $54. I neglected to pay this charge and my checking account was closed and reported to an agency that approves checking accounts. Of course, since I left that bank, I was able to open a new one, but again last year the same thing happened. The new account was also overdrawn, this time by $900. So by now I'm really looking bad. No one will approve my application. What should I do? I'm paying my bills with money orders. Is there something I can do to get a checking account?
-- Stella

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Dear Stella,
I'm glad you realize that you are looking bad. This behavior is certainly not cute and to do it twice tells me you were not taking care of yourself financially. Now that you are taking responsibility, let me help by first clearing up something in your question. The agency where your checking account activity (specifically your account overdraws) was reported does not approve or disapprove checking account applications. The bank or credit union where you are applying uses the information gathered by the agency to make a decision about whether to issue you a checking account.

These agencies are like kissing cousins to credit bureaus. They share a similar background, but they are not married! Negative checking account information is reported to the agency by your financial institution and is kept in a database that is accessed by banks and credit unions when making account decisions.

Before we address your last question, "Is there something I can do to get a checking account?" let's briefly discuss why you are overdrawing your account and how to avoid doing so in the future.

Overdrawing your account likely means one of two things: You are not paying attention (I call it C-ADD, for checking account deficit disorder) or you are living beyond your means.

Below are tips to avoid overdrawing your checking account:

  • Enter every transaction into your checkbook register. Make sure to include everything: dates, checks, debit card purchases, deposits, automatic or preauthorized withdrawals or deposits and ATM withdrawals. Just as important, keep a running total of the balance of available funds.
  • Consider keeping a cushion of $100 or, in your case, as much as $900, that is not recorded in your checking account register as a buffer. When your checking account gets low, you will still have a safety margin.
  • Sign up for overdraft protection either from a savings account (where you could put the $900) or in the form of a line of credit. If you believe you will not abuse it, go ahead and sign up for this added protection.
  • Bottom line: If you do not have the money in your account, do not write the check, do not use your debit card and do not withdraw money that does not exist from your account.

Now to your question of how to get a checking account. My advice is to get your report from the check verification companies and see just how much damage you have done. By far, the largest such company is ChexSystems (www.chexhelp.com).

Entries stay on your report for five years and can be removed only if the information is inaccurate. Be sure to pay any unpaid balances that you may have at the banks that closed your accounts. The bank is required to list that the account was paid.

Once you have cleared up any outstanding balances, take the report with you to the new bank or credit union at which you are applying and talk with the new accounts manager. If you are upfront about your problems (before they check) and can convince the manager that you are no longer a risk, you may be offered the account.

Keep trying if you are rejected. Once you obtain an account, don't overdraw it, or you will be faced with five more years of bad luck!

Good luck!

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.

 
-- Posted: July 23, 2004
     

 

 
 
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