Check Out of Your Checking Account
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Privacy Rights Clearinghouse
Is your bank starting to charge you monthly fees for your formerly free checking account? Has a large, impersonal bank taken over the smaller bank that you were used to? Do you visit your local branch for service, and receive a sales pitch for products that you do not want? For these and other reasons, many consumers have become dissatisfied with their banking arrangements. If you are unhappy with your current bank, this alert will help you navigate the issues involved in switching your checking account to a new financial institution.
Let’s first focus on five privacy issues involved in opening a checking account at a new financial institution:
- You will be required to present identification to open a new account. Customer identification programs (CIPs) are required by the Patriot Act. The CIP Rules establish the minimum information a financial institution must collect from you before opening a new account. These include your name, date of birth, address, and identification number (typically your Social Security number). Beyond this, financial institutions have flexibility to adopt additional appropriate CIP procedures. Banks must keep records of identifying information and check customer names against terrorist lists. This applies to anyone that opens a new account. For more information about this, see PRC Fact Sheet 31: Customer Identification Programs for Financial Transactions.
- The financial institution will most likely look into your check writing history to see if you have been responsible with your financial affairs. If you have a history of mishandling an account, the bank might refuse to open an account for you. Generally, banks use a company called ChexSystems, which is a specialty consumer reporting agency. You have a right to obtain a free copy of your ChexSystems report annually. For more information about ChexSystems and other specialty consumer reporting agencies, see PRC Fact Sheet 6b: Other Specialty Reports.
- The bank may also look at your credit report. If the bank declines your application based on information in a credit report, the must tell you and give you a chance to correct information in your report that may be inaccurate. You have a right to obtain a free copy of your credit reports annually. For more information, see PRC Fact Sheet 6, Section 3 on Accessing the Credit Report.
- The financial institution will provide you with a “Privacy Notice” which will explain how your personal financial and other information is collected, how your information is used, and how you can opt-out, which means you say "no" to having your information shared, sold or otherwise disclosed to outside companies. Privacy Notices can be very difficult to read and understand. To learn more, see PRC Fact Sheet 24: Protecting Financial Privacy.
- Finally, you will want to take a good look at the branch operations of the financial institution. Observe the bank and its employees carefully to see how well your privacy and personal information will be protected. Are there papers on your banker’s desk with other individuals’ personal information? Can other people overhear your conversations with your banker? Are computer monitors visible to prying eyes? How well are documents secured? Are discarded documents properly shredded?
In addition to the privacy considerations outlined above, you may want to think about the following general consumer tips:
- Consider using a local bank or credit union that may be more responsive to your needs. The Move Your Money project is a nonprofit campaign that encourages individuals to divest from the nation’s largest banks and move to local financial institutions. It provides several resources for locating a new financial institution.
- When you are ready to change banks, you’ll have to maintain both your new and old checking accounts for a few weeks until everything switches over. That can be a little tricky. Be sure to read Move Your Money’s handy seven step checklist to have a smooth transition.
Checking out of your old checking account can take a bit of effort. But it can result in lower fees, better service, and better control over your private information.
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