The downside of this arrangement is that it sort of encourages financial indiscipline. Since banks have to protect their interests from such financial irresponsibility or indiscipline, and to ensure that only financially responsible individuals operate a checking account, several countries have in place, organizations or databases containing information about individuals considered 'undesired customers' that banks generally have access to.
The ChexSystems is one of such organization. It is considered one of the major check systems in the United States and it is basically an association of several financial institutions that have networked together to create a common database where the records of customers considered financially irresponsible and thus unwanted are compiled.
The way this works is that, once an individual's checking account is closed due to what a bank creditors financial mismanagement, which could range from serious acts of fraud to trivial financial irresponsibility such as continuously overdrawing your account, the bank reports the individual to the ChexSystems . Once an individual's record gets to the ChexSystems database, every financial institution affiliated with the database considers the person an unwanted customer and for the five next five years, opening a checking account becomes essentially impossible.
Although, there are organizations or individuals who claim to have lists of financial institutions not affiliated with the ChexSystems, who would gladly open a checking account for individuals in the ChexSystems and though some banks will open a 'second chance' checking accounts for such individuals, you would still agree with me that it is always best to responsibly maintain and protect your checking account and then stay out of the ChexSystems database. Unfortunately, there is very little information about how and why people get into the ChexSystems. When terminating an account and reporting to the ChexSystems, the information most bank usually provides "closed for cause", without specifying the 'cause'.
However, as far as you are not involved in type of fraud, the common cause of account termination could include: not reimbursing your bank for overdraft amounts; misleading savings accounts, ATMs or debit cards; providing wrong or misleading information at the time the account was being opened. Of course, there are lots of other factors that could get a person into the ChexSystems, but staying clean of these and other irresponsible acts would ensure you are not labeled an unwanted customer. Checking account is a vital part of modern life; it is worth protecting.