Consumer Comeback Blog

Bouncing Checks Affects Your Credit History

People who are struggling to make ends meet often play roulette with their bills, holding their breath to see if a check will clear before payday. The Federal Deposit Insurance Corporation warns consumers that gambling with your checking balance can have a lasting impact on your credit history.

If you think bouncing the occasional check or being overdrawn is no big deal, think again. Bounce checks too often and you could be among the 30 million Americans who lost their checking account over the last five years. In addition to closing your account, every incidence of insufficient funds or overdraft can land on your credit report and stay there for up to five years, reported the Nueces County Star.

Banks report bounced checks to debt collector and credit reporting agencies such as ChexSystems. The FDIC Consumer News says that you may be able to negotiate with your bank to remove a report from ChexSystems information, particularly if it was reported in error, or if you have a positive track record with the bank. If the information is correct, neither the bank nor ChexSystems is obligated to remove the item from your history. Consumers can contest items on the ChexSystems by submitting objections in writing. Even if they are not dismissed, comments will be noted in your file.

Despite the proliferation of check cashing storefronts, life without a checking account can limit you financial mobility. Sure, you can pay with cash for many goods and services, but it makes paying bills much more difficult. You are basically limited to getting money orders or sending large amounts of cash in the mail, which is generally ill-advised.

Once your account is closed by one bank, you may have difficulty finding another bank that will give you a checking account. If you manage to keep your account open, you can probably forget about free checking. Expect more fees and higher balance requirements to come your way.