A bank account can feel like something for later, after housing and work. But a lot of reentry runs through one: a paycheck by direct deposit, a safe place for release money, a way to pay rent without buying a money order. And the questions people ask are specific. What ID will the bank want? What is ChexSystems, and am I in it? What happens if the bank says no?
Here are the answers, in order.
Why it is worth doing early
The FDIC's Get Banked campaign puts it plainly: depositing a check at your own bank is free, direct deposit gets you your money sooner than a paper check and skips check-cashing fees, and paying bills can be cheaper without money orders.
Deposits at an FDIC-insured bank are also insured up to $250,000 per depositor, per insured bank, for each account ownership category, and the NCUA insures individual accounts at federally insured credit unions up to $250,000.
What to bring
Federal rules require banks to collect certain information and verify who you are. The FDIC's guide How to Open a Bank Account lists what you will be asked for:
- A photo ID. Usually a state ID or driver's license. The FDIC also names a passport, a school ID, a Matricula Consular and a resident alien card.
- Your Social Security number, or an Individual Taxpayer Identification Number (ITIN).
- Your date of birth and an address.
Each bank writes its own identity procedures, and federal examiners' guidance lets banks verify identity with documents, non-documentary methods, or both, so what one bank accepts another may not. Call ahead, say exactly what you have, including release paperwork or a corrections ID, and ask whether it is enough. If your state ID is not in hand yet, our guide to getting your ID after prison lays out the order that saves weeks.
No street address? If you are at a halfway house or a shelter, ask whether the bank will use that address. If you have no residential or business street address at all, the federal rule lets a bank take the street address of next of kin or another contact person instead.
ChexSystems: what a record there means
According to the CFPB, banks and credit unions use checking account reports from companies such as ChexSystems and Early Warning Services to decide whether to offer you an account, and what kind. Those reports can show that you:
- Left a negative balance, for example from an overdraft, that you never repaid, and the bank closed the account (an "involuntary closure")
- Were suspected of fraud or have a history of writing bad checks
- Shared a joint account with someone who had those problems
For people coming home, time can help. The CFPB says these companies can't include most negative information that is more than seven years old, and some disregard information more than five years old. And if you had an account when you went in, find out what happened to it. An unpaid negative balance on an account the bank closed is exactly what these reports record.
Check before you apply. You have the right to a free copy of your checking account report every 12 months. The CFPB lists how to request one from ChexSystems and from Early Warning Services. Knowing what is there tells you which account to ask for.
Second chance checking accounts
The CFPB describes a second-chance bank account as a reduced-service, reduced-fee account meant for people who have problems in their banking history and cannot open a regular account. Reduced service means limits, so ask what the account can't do.
The CFPB also notes that accounts designed to prevent overdrafts are less risky for banks, so banks may rely less on checking account reports for them, and you may qualify even if you were recently turned down for another account. Some banks and credit unions will ask you to pay off old unpaid charges and fees first.
Before you sign up, ask about the monthly fee and how to waive it, any overdraft fees, and whether the account can become a regular one later.
Bank On certified accounts
Bank On certifies accounts that meet the Cities for Financial Empowerment Fund's National Account Standards: low costs, no overdraft fees, a debit or prepaid card, and online bill pay. According to Bank On, most certified accounts cost $5 or less a month.
If your report has an old mark, this part matters. Bank On's guiding principles say people should not be kept out of an account by screening for anything other than a history of actual fraud or ID the bank can't accept. So if your record is an unpaid overdraft rather than fraud, a certified account is a good place to start. Each bank still makes its own decision, so ask.
The Bank On account finder lists certified accounts, many of which can be opened online. The coalition map shows local Bank On coalitions of government, community and bank partners. If one is near you, it is worth a call.
Release cards and prepaid cards: know the fees
You may leave custody with your money on a card. Federal Bureau of Prisons facility handbooks say trust fund accounts are consolidated onto a release debit card at release. State and county systems vary.
Read that card's fees before you use it. In 2021 the CFPB took action against JPay, a prison financial services company, for charging people fees to access their own money on prepaid debit cards they were forced to use, and for making people sign up for its card to receive gate money, the money provided under state law to help people meet essential needs at release.
Prepaid cards in general can carry a monthly fee, per-purchase fees, ATM withdrawal fees and cash reload fees. The CFPB explains how to read a card's short fee disclosure so you see those costs up front. Once your account is open, the simplest fix is to move release card money into it and have your pay deposited directly.
If a bank says no
A denial comes with rights. If a bank or credit union turns you down based on a checking account report, it must give you a notice that names the company that supplied it. Then:
- Get the report. You are entitled to a free copy if you ask within 60 days of the notice, according to the CFPB.
- Dispute anything wrong. File with the reporting company and with the bank that supplied the information. Both have to investigate and correct errors, and the reporting company's investigation is free. The CFPB has a sample dispute letter.
- Add your side if the record stands. You can send the reporting company a brief statement explaining why you think the record is wrong, and it must include that statement in reports it issues about you.
- Ask about a different account. A second chance or Bank On certified account may still be open to you.
- File a complaint if you are stuck. The CFPB takes complaints online and forwards them to the company for a response.
Keep track of the dates
Request the reports, file a dispute, follow up, go to the bank: each step has a date. The free calendar in Free and Forward can hold those dates next to your check-ins and court dates, with phone reminders in the App Store and Google Play apps. For the rest of your first days home, see Your First 72 Hours Home.
Free and Forward is not a bank, a law firm or a financial adviser, and this is not legal or financial advice. Account terms and bank policies change. Confirm the details with the bank or credit union before you rely on anything here.
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