Living paycheck to paycheck when I first left college, I didn’t have much money leftover at the end of each month to do much else other than make sure the bills were all paid and maybe treat myself to Starbucks. I wasn’t financially irresponsible by any means, but between rent, student loans, and other living expenses, cash was always tight. I thought I was being responsible because I was putting aside a little bit of money into my company-sponsored 401(k). Then one month I wasn’t as careful as I normally am and accidentally overdrew my checking account by nine dollars and some change. A recent deposit hadn’t posted yet, and I had no clue how low my funds were at the time of the deposit. I didn’t get any notifications from my credit union that’d I’d overdrawn my account, but the next day when I went to get gas, my card was declined. Awesome.
I called my credit union while trying not to have a panic attack in my car, and they told me I’d overdrawn my checking account and I’d get a letter in the mail stating any fees that I’d owe as a result of the overdraw. By some form of bad luck, I never got the letter and since I didn’t use this particular checking account much, I forgot about it.
Fast-forward to a few months later when I tried to open an online checking account and was denied by the bank. What I learned from the banker is that when you apply for a bank account, banks utilize an agency called ChexSystems to see if you’ve had issues with any bank accounts in the past. If you have a negative report with ChexSystems, you can be denied a new bank account similarly to when you apply for a credit card. For credit cards, your information is sent through a credit reporting bureau to verify your credit and determine if you’re considered a high risk customer. ChexSystem does the same thing, but with your banking history.
Having checks bounce, mishandling your checking or savings accounts, or failing to pay fees are all ways to end up with a negative ChexSystems report. Here’s the kicker – once you end up with a negative ChexSystems report, it’s insanely hard to get it removed. ChexSystems keeps its records for five years unless your financial institution reports that an error was reported when you file a dispute.
I learned all of this the hard way because I just wasn’t paying attention. I had no idea ChexSystems even existed, or that it would make setting up an online checking account so difficult. It’s still possible to get a checking or savings account before your five years is up. Some banks don’t use ChexSystems, so you may be able to open an account through one of those banks. You can also look into what is called a second-chance checking account, which may have monthly fees but eventually would let you convert to a regular checking account after a year or two of being a good customer with no issues. Some people choose to use prepaid debit cards until they’re able to get a bank account.
The whole ordeal was so embarrassing. I couldn’t believe that such a small screw up could affect my financial independence so negatively and for such a long period of time, or that I had no idea such a thing even existed. After I was able to open an account with a bank that didn’t use ChexSystems, I knew I needed to stop living paycheck to paycheck and get my life in order. I took a hard look at my monthly spending and realized that a large chunk of my money each month was going towards groceries. Most of the time I’d buy my groceries without making a list and come home with a bunch of impulse buys, often not enough to put together an actual meal. So, I started meal planning, making an actual grocery list, and clipping coupons. My roommate and I made the decision to cut off our cable and split some streaming services instead. The next year, we moved into a slightly smaller apartment in a less trendy neighborhood, but saved a ton of money.
Making these financial decisions wasn’t easy, but sometimes the hard stuff is what fixes us. With my extra money, I was able to finally save a little bit more each month and accelerate paying off my student loan debt. I paid of my loans in half the time. Tracking my spending made me more disciplined in general, especially with my eating habits leading to a little bit of weight loss from some extra pounds I’d been carrying around since college.
Don’t let a small financial mistake ruin your financial future. I was able to use my irresponsible financial habits as a chance to become a more responsible adult all around.
Photo is pixabay creative commons
Guest Author Bio
Jess Holmes is a lifestyle blogger who loves helping others by providing useful content to readers. She currently resides in Arizona with her family.