checking account

Will Closing Your Checking Account Affect Your Credit Score?

March 1, 2016 By Amanda Blankenship 1 Comment

When it comes to closing and opening accounts things can get a little hazy. In fact, when it comes to what affects your credit score and what does not, things can get a little confusing as well. When does opening an account affect your credit? When does closing an account affect your credit? How long will it take your credit score to recover after opening or closing an account? Should you avoid certain things to better your credit score? Most importantly, will closing your checking account affect your credit score?

You may be thinking about closing your checking account for a number of reasons. Maybe you don’t agree with the costly fees that the bank charges. Maybe you have found an account that will better suite your needs. You may have even gotten married and are opening accounts with the bank that your significant other holds accounts with (it makes things a bit easier). Whatever your reason may be, you should know how making a change in your accounts will affect your credit score.

If you are seeking to close your checking account, it will not affect your credit score whatsoever. The only thing that closing a checking account will affect is your ability to open another account in the future. This is especially true if you close your account while it has a negative balance. This can also be the case if the bank is forced to close your account due to it being overdrawn. The way a bank account works can be a bit confusing. Let’s take a look at the details…

Banks do not report to credit bureaus. They do, however, report to something called the “ChexSystems.” The ChexSystems was created by banks and credit unions to help identify people who are not reliable to open accounts. This addresses people who abuse checking accounts, overdraw their accounts and then close them, or have multiple overdraws on accounts.

While your name will not be given to any credit bureau because of your bank account, it will be reported to the ChexSystems. This makes it difficult for you to open other accounts. There are a few reasons that your name would be reported:

The bank was unable to collect an overdraft which they honored on insufficient funds
Multiple overdrafts
Abusing your account or ATM
Any kind of false identification or fraud

You can also be reported to ChexSystems if you open and close accounts too often. If you are reported to ChexSystems, you can be prevented from opening a new checking or savings account through your bank or any other bank in the ChexSystems. If your name is reported to ChexSystems, you can expect to have that infraction on your history for up to five years. If you have more than one report on your name in the system, you will likely be unable to do any regular banking outside of “second chance accounts.”

It is important to keep your checking account in good standing. It is similar to falling into the “debt trap,” you don’t want to do it. When it comes to your banking, keep your nose clean and you won’t have any problems.

Photo: Flickr: GotCredit

What Is Checking?

August 11, 2015 By Will Lipovsky Leave a Comment

In today’s digital world, writing checks is becoming a rarity. There was a time when everyone paid their bills by check. But today, most of us only use checks to pay the landlord, a doctor’s office or a school organization. So it’s still worth knowing how to balance a checkbook. It’s also important to note how long it takes for checks to clear.

Despite this, many of us continue to hold checking accounts, mainly because of the other benefits they carry. It’s one of the 10 financial accounts everyone should have. Here’s what you need to understand about checking and why they are the most common type of bank account people have.

Understanding Checking

A checking account is like other bank accounts. The bank holds onto your money, promising to keep it safe until you need to use it. You can write checks from the balance and the recipient can cash the check or deposit it in their own bank account. It’s the most common type of account because the debit and ATM cards that come with checking accounts make them flexible, allowing you to pay many types of bills using the same pool of funds.

Most checking accounts don’t pay high interest. If they do, they sometimes require a minimum balance. People who make few monthly transactions will opt for basic checking, which charges few (if any) fees. In Illinois, Massachusetts, Minnesota, New Jersey, New York, Rhode Island and Vermont, the law requires banks to offer a basic checking service called a Lifeline account. This offers an affordable banking option for the poor and elderly, who often cannot receive Social Security checks without having a checking account.

Why Not Savings?

Most people choose checking accounts, even though they rarely write checks, because savings accounts make it harder to access their money. They don’t offer debit cards, often requiring users to transfer money to a checking account before they can access it.

Savings accounts often restrict the number of withdrawals you can make too, which makes it a poor choice for paying your bills. Because of this, most people prefer to keep a savings account to keep emergency funds while using a separate checking account for paying the bills.

ING $121 Black Friday Bonus Deal

November 27, 2009 By Jeffrey Strain 2 Comments

It’s not often that a company wants to give you money instead of relieve it from you on Black Friday, but that is exactly what ING is offering for today only. If you sign up for their Orange Electric checking account, they will give you $121. The $121 number comes from the amount the average consumer spends on banking overdraft fees each year.

In order to get the $121 bonus, you need to open an Electric Orange checking account using the Reference Code EOSAVE. You then need to make 3 debit card signature transactions (the ones where you sign) within the first 45 days after opening the ING checking account. On day 50, they will place $121 into your checking account.

Hurry. The offer is only good for today! You can sign up here

Thanks to Safari in the forums

Get Your Budget to Work: Stop Caring

November 18, 2008 By Joe Morgan 4 Comments

I’m sure you’ve heard that if you want to be successful in getting or staying out of debt, you should craft a budget and stick to it. Does this really work? I suppose for some people it does, but it’s really never worked for me. That is until I stopped caring so much.

The problem for me with budgeting, as it is usually presented, is that it only set me up for failure. I’m not an automaton. I am capable of setting limits, and staying within them up to a point, but I’m still human. I like to treat myself once in a while. I’m the kind of person who can stick to a minimalist lifestyle for a while, but if things are too tight I eventually splurge. The result is something akin to a the engine of a high performance race car pushed too far and red-lined too long: I explode.

It’s not like test detonating a nuke or anything, but the effect on my budget is painful nonetheless. Then I realized two things:

1. I was being far too strict with my budget.

2. The budget was more useful to me in creating a plan than in actually being the plan.

When my wife and I began budgeting, we sat down with a couple of “budget worksheets” from the web and plugged in our expenses. We pored over every bill from the previous 6 months. When we were done, we took the results to be our baseline expenses. Next we looked for opportunities to cut spending in various categories. The problem is we should have added to certain categories instead of taking away from them.

After about 3 months, we realized that our grocery bill was a bit higher in reality than it was on paper. Add in a few “working lunches” on my part that were little more than an excuse to ditch work for an hour with the guys, and a dinner or two out and we had spending creep. This was a problem because we were so strict with our budget in the first place, we ended up with some pretty big potholes in our cash flow. We’d have to dip into savings about every other month to cover the gap. During those months, we would racked up more credit card debt or even overdraft fees.

Our budget revelation came with the understanding that even though the budget didn’t work for us as a plan, it could be an excellent starting point for developing our a plan. Our budget became a tool for gaining perspective on our spending. Like an x-ray, it allowed us to see details we never knew existed. It showed us where our money leaks were, so we could fix them. It showed us exactly what we spent in car insurance and cell phone payments and other monthly bills that we could shop around or negotiate for a lower amount.

We used our budget to get an idea of just where our money was going, and they created a new line item: Savings. We changed our thinking to build our budget around our savings, and learn to live on what was left. Then we implemented a multi-tiered savings plan. Tier 1 was our checking account. It was interest free, but had no minimum balance requirement. Tier 2 was a long term, high yield savings account at ING or HSBC.

At first, our savings “bill payment” went to the tier 1 checking account. Once this was funded with a modest “overflow” amount, we switched those payments to the tier 2, high yield account. After we had enough to cover unexpected expenses, we began paying off the credit debt in earnest.

Now we run a budget check every 3 months or so to see if we’ve lost our way, but we have enough “padding” to cover any bumps along the way.

So, how does your budget work for you? Is it your plan, or the basis of your plan? Do you stick to it to the letter, or stray once in a while?