OnPath Credit Union

Having a poor checking account history, which can follow customers from bank to bank, means the customer violated the terms of their account, failed to pay owed fees or debts or used their account in a way banks view as irresponsible.

While checking account histories are different from credit histories, they do have a similar function and mechanism for reporting.

Overdrafting or bouncing a check a couple of times over the course of five years might not cause a poor checking account history, but regular overdrafts, long-term unpaid negative balances or documented fraud or account abuse will cause poor checking account history and potentially make it difficult or impossible for you to become a member at some credit unions or open new accounts at other banks.

Do Banks and Credit Unions Share Information About Customers With Each Other? 

Yes – although banking institutions and credit unions may compete for customers by trying to offer better services, lower fees or superior rates and terms on loans, there is some cooperation within the industry. One of those areas of cooperation takes the form of customer behavior tracking.

Third-party companies, like ChexSystems, Early Warning Services and TeleCheck, gather information from banks and create reports on individual banking customers. Banks and credit unions then request a report from these companies when a new customer seeks to open a checking or savings account. The frequency and severity of negative banking behaviors may determine whether the risk posed by the new customer outweighs the benefit of having them open an account.

How Does This Affect People Who Use Financial Institutions?

Banking history tracking means customers can’t go to a different credit union or nationwide bank and expect the new institution to not be aware of account abuses or banking infractions committed in the past. Your new bank will likely be aware of things like:

• Overdrafts
• Unpaid negative balances
• Bounced checks
• Frequent insufficient funds (NSF) fees
• Account abuse
• Fraud and suspected fraud attempts
• Other violations of account terms

Reporting Isn’t Necessarily Consistent

Larger nationwide banks often have automated systems in place that report negative banking behaviors. Regional banks or credit unions that don’t have robust customer management systems may have to do manual reporting of infractions, but this is less common.

A checking account history isn’t like a credit history where your eligibility for a loan or credit is at issue. It’s simply a measure of whether you can be trusted to responsibly use checking or saving accounts, not the likelihood that you’ll pay back debt.

As a result, the reporting agencies aren’t really interested in things like how much money you keep in your accounts on average or how often you make withdrawals. They are primarily looking for red flags that may indicate a potential problem customer so banks can make informed decisions about account eligibility.

Why Does Banking Account History Matter So Much to Banks and Credit Unions?

Financial institutions of all kinds are vulnerable to a version of the free rider problem city governments face. In other words, if too many customers abuse their services, especially the low-cost or free accounts the institution might rely upon for lending funds, the bank could become insolvent or unprofitable.

This phenomenon is a bigger problem for smaller regional credit unions than it is for the nationwide banks given their respective number of customers and the impact individuals can have on the health of the institution. 

Will OnPath Federal Credit Union Let Me Open an Account?

OnPath Federal Credit Union offers Rise Checking, a second chance checking account for individuals who may have a poor banking history. Past mistakes shouldn’t prevent you from using financial services, and we’re proud to offer members the opportunity to restore their banking history.

If you’re worried that a poor checking account history may prevent you from opening an account or using the membership services on OnPath Federal Credit Union, please call us at 800.749.6193 to learn more about eligibility and find out if you qualify for Rise Checking.