Chex System – Definition

Cite this article as:"Chex System – Definition," in The Business Professor, updated March 14, 2019, last accessed October 20, 2020,


Chex Systems Definition

Chex system is a national customer reporting agency. During the screening of account applicants by banks, they request reports from Chex System to check whether there are insufficient checks, pending fees, and other flaws in their banking histories.

A Little More on What is Chex Systems

Banks use it in ascertainment of one’s riskiness to the bank while opening a checking or savings account. When Chex System has unfavorable information about you, it is difficult to open a bank account. Drawbacks in one‚Äôs bank history are kept in the database for five years.

The main reasons that result in someone being registered in the Chex System are overdrafts and withdrawing accounts. Infrequent wrongdoings are not meant to affect an individual negatively, but regular wrongdoers are cautioned to maintain a lot of care.

To stay out of the Chex system:

  • ¬†¬†¬†¬†¬†¬†¬†¬†Avoid writing checks when there is insufficient money in the account to cover them.
  • ¬†¬†¬†¬†¬†¬†¬†¬†Ascertain the grace period for deposits to be credited to your account
  • ¬†¬†¬†¬†¬†¬†¬†¬†Monitor your account balances.
  • ¬†¬†¬†¬†¬†¬†¬†¬†Before closing a checking account, ensure all checks have cleared, all automatic debits have stopped, and all fees have been paid.

Every year, you should seek for your consumer reports from the Chex System and related companies like Early Warning and TeleCheck. One should also examine the credit reports provided by the major credit bureaus such as Equifax, TransUnion, and Experian.

When carrying out an examination of an individual’s annual reports, crisscross for errors and evidence of fraud. ¬†An erroneous report could be the result of incorrect data. Examining the annual credit report one can discover whether or not there is identity theft or other types of frauds included. Faults in Chex System are common and generally take around 30 days to fix. Thought, the erroneous information can stay in the system for a long time.

References for Chex System

Academic Research for Chex System

  • We Don’t Do Banks: Financial Lives of Families on Public Assistance, O’Brien, R. (2012). Geo. J. on Poverty L. & Poly, 19, 485. The paper outlines the previous study that was conducted by Federal Deposit Insurance Corporation (FDIC) that reveal that at least nine million American households were not using the banking services and they had neither checking nor a savings account. By increasing demand through education, outreach and encouraging banks to customize their products towards low-income consumers’ needs better, policy researchers and advocates have tried to stimulate banks accounts to use by low and minority households. The assumption of the possibility of low-income households being better off if were banked is the encouraging factor of policy advocacy.
  • Banking the poor: policies to bring low-income Americans into the financial mainstream, Barr, M. (2004). The paper states that low-income households in the United States frequently do not have access to the financial services like bank accounts and undergo through expensive costs of performing regular financial activities by use of check cashers and other financial service providers. Also, Low-income families faces, paycheck to paycheck life, and lack of longer-term investments, the families face difficulties in future financial savings and planning. The paper suggests the transformation of financial services for the poor. Better access to financial series is crucial for low-income individuals looking forward to joining the economic mainstream.
  • Comparative study of k-means and mini-batch k-means clustering algorithms in Android malware detection using network traffic analysis, Feizollah, A., Anuar, N. B., Salleh, R., & Amalina, F. (2014, August). In Biometrics and Security Technologies (ISBAST), 2014 International Symposium on(pp. 193-197). IEEE. The paper examines the performance of two grouping algorithms, k-means, and mini-batch k-means, in the detection of Android malware. Network congestion produced by the Android applications both regular and malicious is examined for discovery. Examination involved Malgonome data representative in developing dataset. Eight hundred representatives were taken from a population of 1260 Android malware. The outcome indicated that in terms of Android Malware discovery, mini-batch k-means algorithm has better performance compared to k-means.
  • Wal-mart N’est Une Banque, Pagani, M., Osland, A., & Borchers, A. (2016). Journal of Case Studies, 34(2), 121-127. The paper states that Wal-Mart was focused on providing value to its customers through reduced costs, innovation, technology, and broader geographical availability. In responding to customers demand more customers who never had access to traditional banking services, Wal-Mart began offering financial services. The unbanked and under-banked represented 22% of consumers were individuals with little financial means and were unable to afford traditionally; baking products. Unbanked had no traditional bank accounts while under-banked had the accounts but also used other financial banking services outside the banking system.
  • Banking, Saving, and Transitions Out Of Homelessness, West, M. (2010). The paper states that when dealing with the vulnerable and homeless individuals and families in a community empowerment fund, highly varying income and emergencies keep families on edge. Undertaking education on budgeting and money management and supporting through the process of critical to safe, convenient and meaningful deposit services to individuals and families that do not have experience with formal financial institutions is more significant.
  • The unbanked problem in Los Angeles, Khashadourian, E., & Tom, S. (2007). United Way of Greater Los Angeles. The paper states that the unbanked and underbanked in Los Angeles are the low-income people who never have an education. The unbanked and underbanked complain of lack of funds to maintain their bank accounts even though they can pay higher prices to non-banking services. The author suggested a study to serve the unbanked and underbanked people in Los Angeles.
  • Blacklisted: The Unwarranted Divestment of Access to Bank Accounts, Perez, J. M. (2005). NYUL Rev., 80, 1586. The paper shows the relationship of thriving in America‚Äôs conventional economy with the capability of maintaining a bank account. The papers also show the examination that was carried out indicated many Americans did not have bank accounts because of varying reasons. Use of Chex System in the financial institutions are blamed, and banks have been found to report the account to the Chex System only if the account has a challenge. Chex System punishes customers and may be discriminatory in banks to exclude unwanted customers. A recommendation of executing the Community Reinvestment Act to remove the limitation of the Chex System was proposed to bring back millions of households into America’s general financial economy.
  • Corporate governance and performance of European commercial banks, Kryvko, A., & Reichling, P. (2012, April). ¬†In International conference ‚ÄúImproving financial institutions: the proper balance between regulation and governance,” Helsinki. This paper performs analysis empirically the influence of corporate governance of key performing factors of publicly traded European banks from 2005-2009. In consideration of all sources of endogeneity, the relationship between governance and performance is approximated by the use of the Generalized Method of Moment (GMM) technique. Banks’ performance was found to be boosted by board size, gender variation on management board and availability of compensation committee while chief executive officer personal traits influence banks’ risk-taking behaviors.
  • An inclusive, progressive national savings and financial services policy, Barr, M. S. (2007). Harv. L. & Poly Rev., 1, 161. The author starts by asking those who pass by signs of checks cashed here, money orders for sale, and payday loans without thought of the impacts of those signs to the lives of low-income people. For many low-and ‚Äďmoderate-income people, the perception is relatively different. Poverty and other socioeconomic problems are contributed by expensive financial services from; check cashers, payday lenders and cash transmitters, restrictions to savings, insurance shortages and credit constraints that make low income to live paycheck to paycheck.
  • Policy Recommendations for Expanding Access to Banking and Financial Services, Friedline, T. (2018). The paper outlines that there is a necessity of accessing financial services in the current economy despite lack of access by many households. There is the identification of policies with the capability of expanding access to financial services for a household in the United States by the brief issued through the Grand Challenges for Social Work initiative‚Äôs network to build Financial Capability for All.

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