Last week, I heard a co-worker complain about being denied when trying to open a new checking account. I told her to check her ChexSystems report. ChexSystems is a consumer information database that contains information about your banking history, similar to credit bureaus and your credit history. Turns out she forgot about an account and actually owed some other bank some money (probably just piling on inactivity fees…).

For the same reason, you have the right to a free ChexSystems report once a year, just like the annual credit reports. In addition, you can request one whenever you get declined for a bank account where ChexSystems was used.

I decided to get my own as well, and surprisingly it came via snail mail within a week or so. I say surprisingly because last time I tried to order a couple of years ago, I don’t think I ever got it. (I have never had trouble opening a bank account, so I figured nothing bad was on it.)

They have a sample ChexSystems report online, which looks exactly like what I have, and explains all the items they have recorded:

Reported Information
“Reported Information refers to reports of accounts that have been mishandled, reported for cause, and/or outstanding debts. Reported Information is submitted directly to ChexSystems by members of our service, which consists mainly of financial institutions. Our current practice is to retain this information for a period of five years.”

This includes account closed due to repeated bounced checks, or overdraft debts that were never paid. If you have one of these in error, you’ll definitely want to clear it up.

Inquiries Initiated By Consumer Action
“Inquiries Initiated By Consumer Action refers to inquiries resulting from a transaction initiated by you. These include applying for a credit card or completing an application at a financial institution. Please note that the inquiries are part of your credit history and may be included in our reports to others. These inquiries can be viewed for ninety days up to three years. ”

Basically, a list of all banks that applied for within the last 3 years that used ChexSystems to verify me. They included KeyBank, E-Trade, FNBO Direct, WaMu, DollarSavingsDirect, and WT Direct. Banks that I know that I applied for recently that weren’t on the list include EverBank, which makes sense since they used the Equifax ID check service during my application process.

Inquiries Not Initiated By Consumer Action
“Inquiries Not Initiated By Consumer Action refers to inquiries resulting from transactions you may not have initiated, so you may not recognize the source. Members of our service with a permissible purpose include current creditors, pre-approval creditors, and potential investors trying to assess risks. We report these requests only to you as a record of activities, and we do not include any of these requests on credit reports to others.”

The only bank listed here was Washington Mutual. For some reason, they made three inquiries in one day back in 2006. Weird.

Retail Information
“Retail Information refers to returned checks written on an account and certain collection accounts. Retailers and other businesses report this information to Shared Check Authorization Network (SCAN). ChexSystems receives this information directly from SCAN and is not involved in the collection of these items.”

Nothing here, I believe it counts bounced checks reported by merchants.

History Of Checks Ordered
“History of Checks Ordered refers to a record of check orders placed within the past three years.”

Nothing here, either. Probably because I would never order from Deluxe Corp. (which owns ChexSystems) since they are horribly overpriced. I barely make it past the starter checks usually, but if I do need checks I buy them from Costco.

Social Security Number Validation
“Social Security Number Validation indicates the year and state that a particular sequence of digits first became available for issuance. This information does not include the name of the individual to whom the number was issued.”

It says my SSN became available for issuance in 1987. This is interesting, considering I was born nine years before then…

Drivers License Validation, Drivers License Verification
“Drivers License Number Validation indicates whether or not the format of the drivers license number provided matches the requirements set by the state of issuance. Drivers License Number Verification is information provided to ChexSystems by the state that issued the drivers license number. This information, which is limited to certain states, identifies the name and date of birth of the individual to whom the drivers license was issued.”

Added: A smaller competitor to ChexSystems is TeleCheck. To get your free annual report from them, you must call 1-800-366-2425. I called them on 1/11, and they stated that they had no negative information me, so there was nothing to send me.

My wife recently applied for an EverBank Yield Pledge Money Market account for their introductory rate. Everbank also “pledges” to stay amongst the top 5% of competitive banks, and I have seen that rate has indeed stayed competitive to other online banks for the last couple of years. (WaMu is now down to 2.25% APY, ahem…)

Currently, the promo rate is 1.10% for 6 months, and the standard rate after that is 0.86% APY. (1.10% guaranteed for 6 months is still better than any 6-month CD out there.) The application process is a lot different now than when I applied for myself a year or so ago, so I’ll start with reviewing that.

Background and Promotion Rules
Everbank always offers a 6-month introductory promo rate to both their FreeNet Checking and Yield Pledge Money Market accounts. The rule for these promotions is that you can only get one 6-month bonus period per person (Social Security number), and that you can get them at the same time, but not one after the other. As you might have guessed, one way around this is for couples to open separate accounts at least 6 months apart.

So if you opened both the FreeNet Checking and Yield Pledge Savings account on November 1st, you can get the promo rate for both ($100,000 total balance) for 3 months. If you open up the Yield Pledge a month later, you’ll only get the promo rate on that account for 2 months.

Step 1: Personal Information
The standard info is requested on the first part of the application – address, SSN, and also employer info.

Step 2: Identity Verification – No Hard Pull
In the past, Everbank has done a hard credit check when taking applications. However, it appears that they no longer do this. For one, my wife did it and she has a credit monitoring service which alerts her of such activity – no alerts from Everbank.

The website itself is a bit confusing on the subject, stating the following:

What kind of inquiry does EverBank obtain and how will it affect my credit score?
EverBank obtains a credit inquiry for the purposes of opening an account. While such an inquiry will show on your credit report, it’s coded differently than an inquiry for a loan and would have less of an impact on your credit score.

I personally interpreted this as a soft pull, but I also called to confirm. The customer service rep stated that they no longer do a “full credit check” but only confirm ID.

This is finally supported by the fact that they now ask the real-time Equifax ID Check questions during your application, which are based on data from your credit report. Things like names of streets you’ve lived at, where you hold mortgages, and previous employers. Noneof the banks that I’ve had do this have done a hard pull.

Step 3: Funding
Finally, we arrive at the funding ($1,500 minimum). In the past, you had to wait for a welcome package and send in a physical check along with a physical signature and other paperwork. Now, as long as your initial deposit is under $25,000 you can fund online using routing and account numbers. From the website:

ACH funding is available for personal Checking, Money Market, and Asset Manager Service cash management accounts. You can fund just the minimum opening deposit or any amount up to a total of $25,000 per day. For funding more than $25,000, you’ll want to open now with $25,000 and send a check or wire for the additional amount.

For the ACH funding source account, you can use any account that supports check writing. You can verify ownership of your source account in 3 days through a small deposit and withdrawal.

You can also choose to activate the Checkwriting option here (3 per month).

After you enter these details you can go ahead an log into the Everbank website and poke around, although it takes a few days for the initial deposit to arrive. All in all, the application process is much improved by being completely online with no paperwork, with apparently no hard pull.

I went ahead and opened an account at DollarSavingsDirect and their attractive 4.0% APY. WaMu had dropped their savings rate to 2.5% APY, and DollarSavingsDirect still seems to be in their “new bank customer accumulation” stage, which means keep the rates high as long as possible. Might as well take advantage of loss leaders…

People have called EmigrantDirect and DollarSavingsDirect clones of each other. I mean, your money is at the same bank – Emigrant Bank, FDIC Certificate #12054 and the home pages look very similar. But man, they truly did a cut-n-paste job. Check out the identical internal interfaces, down to the color scheme:

The application was straightforward and efficient – completely online, no paperwork to sign or print out, and your deposit is done using only routing and account numbers. Took less than a week to get up and running. I would pick your funding account carefully, because adding additional bank relationships does require paperwork.

As noted, the major difference is that with DollarSavings you need to maintain a $1,000 minimum balance to get the 4.0% APY, unlike Emgirant with no minimum. Good news is that there are no fees at DSD if you drop below $1,000 though, just a lower 1.0% APY.

Some eagle-eyed readers let me know late last night that WaMu/Chase quietly made a change to their offered interest rates. Their online savings account is now at 3% APY when attached to their free checking, down from 4%. Not too bad, but no longer the highest yield for a no-minimum-balance savings account.

They also lowered the rates on their online CDs, with the 8-month, 12-month, and 13-month CDs all at 3% APY. It looks like those that opened up one of their 5% APY CDs late last week just got in under the gun. My 12-month CD was successfully funded yesterday, and today I see my 5% APY rate shown online. All signs seem to suggest that Chase will honor these CD contracts. Hurray for small victories 🙂 , I hope everyone who wanted in on these got their application in on time.

Options?
Given these actions, it might be time to move banks soon… now to investigate other attractive all-in-one Checking/Savings combos. Here are some possibilities:

Everbank has their FreeNet checking account with a 1.10% bonus rate for the first 6 months, and then 0.70%-0.86% APY afterwards depending on balance. No minimum balance, but you need $1,500 for free billpay. $6 in free ATM fee rebates each month.

Combine this with Everbank’s Yield Pledge money market account, which also has a 1.10% bonus rate for the first 6 months, and then 0.86% APY afterwards. This account “pledges” to stay amongst the top 5% of competitive banks, and there is a minimum balance requirement of $1,500 to avoid fees.

Fidelity has their mySmart Cash account. It is kind of a checking account/brokerage account hybrid where you can basically use their money market funds (non-FDIC-insured) as the main holding place on your cash for higher yields. You can choose from taxable to tax-exempt money market funds with competitive yields. Their main checking account is FDIC-insured, and is currently earning 1.50% APY. No minimum balance, and you get unlimited ATM fee reimbursements.

Washington Mutual was taken over by the FDIC today (Thursday). But for most account holders, there is no reason to panic.

All deposits, even those over $100,000 FDIC limits, will be taken over by JPM Chase, and are still safe. From the WSJ:

While the exact structure of the transaction wasn’t immediately known, J.P. Morgan is expected to acquire Washington Mutual’s deposits and branches, as well as other operations. The deal isn’t expected to result in any hit to the Federal Deposit Insurance Corp.’s bank-insurance fund, according to a person familiar with the arrangement. […]

Under the deal, New York-based J.P. Morgan, which has long coveted WaMu as a way to secure a footprint on the West Coast, will assume most of the thrift’s deposits and branches, as well as some other operations.

There will be no interruption in services. Bill payments will go through, checks will clear, direct deposits will arrive, your account number stays the same, the website still works, branches will still open on Friday. From CNN:

“For bank customers, it will be a seamless transition,” said FDIC Chairman Sheila Bair. “There will be no interruption in services and bank customers should expect business as usual come Friday morning,”

Shareholders get nothing. Well, not like they had much hope anyways with the stock at less than $2 per share. I hope this is another wake up call for those that still think it’s a good idea to keep a large portion of their portfolio in their company’s stock. I don’t care if you work for GM, IBM, or Microsoft. Shares of any single company always have some risk of becoming worthless.

More details to come…
They haven’t released the official press release yet. It will be interesting to see how the interest rates will change, and if they will choose to honor outstanding CDs. Chase Bank doesn’t have the same products as WaMu did, but IndyMac still honored their existing CDs. Maybe it’s time to apply for one now? WaMu is still advertising everything like their 4% APY savings as before on their website.

Anyways, don’t panic, okay? My local branch is crowded enough as it is. I don’t need a line around the block of nervous people clamoring for their money in small bills. 😉

Update: Here is a preliminary welcome page from Chase. Nothing too much new there, no mention of interest rates changing. Still offering the same 4% APY savings and 5% CDs on the website.

Update 2: Here is the official page from FDIC.

Will I continue to earn interest at the same rate?
All interest on deposits accrued through September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon.

Update 3: They updated and changed the FDIC page!. It now states:

Will I continue to earn interest at the same rate?
JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waiving early withdrawal penalties.

Accordingly, the 5% APY CDs should stay valid.