What To Do When You Can’t Open a Bank Account

It is normally simple to open a bank account. However, just as a credit card application may be denied, an account application may be refused by a bank or credit union.

If this occurs to you, keep in mind that you have alternative options. It's a good idea, though, to try to figure out why the bank made the decision. According to a 2019 Federal Deposit Insurance Corp. poll, around 20% of the 7 million U.S. households that do not have a bank account cite ID verification, credit concerns, or troubles with a previous bank account as one of the reasons to not have one. Other causes include client worries about maintaining the minimum bank balance and bank locations that are inconvenient.

Regardless, if you find yourself in a situation that you can’t open a bank account, this article might be helpful. It brings alternatives and solutions to this issue which will allow you to store, invest, and use your money without necessarily opening a traditional bank account.

The Final Checks

Before jumping into the alternatives to when you can’t open a bank account, there are some things you might consider checking. These can affect opening a normal bank account, as well as accessing the alternatives.

Make Sure You Verified Your Details

Sometimes, the reason why you were not able to open a bank account is that you are filling in a piece of information wrong. When you open a bank account, you must normally enter your name, address, Social Security number, and other personal information. Errors in any of these things can have an impact on your application.

Some of the alternatives to bank accounts that will be presented might also ask for this information. Thus, it is important that, regardless of which service you are going for, you verify that your personal information is correct.

Your bank or institution of choice will most likely collaborate with third-party organizations to electronically validate your application information. The bank is then contacted if the data cannot be validated. You will also probably be required to supply more paperwork to establish your identity, such as a copy of your driver's license. If you fail to do so, your application can be denied.

Review Your Bills

Sometimes, a bank might refuse your applications because you have a debt or bill not paid yet. Maybe that is the reason you are reading this article, and if it is, just move forward. However, if you don’t think you left anything unpaid, check again. Very often, bank account applicants might have forgotten about a silly bill or a small debt you took not that long ago and forgot you did not pay out. Even small unpaid bills might be a reason for some banks to refuse your application for a bank account. Make sure you double-check these and pay them if possible.

If you are aware of debt or unpaid bills and that is exactly the issue of why you can’t open a bank account, don’t worry. The following section brings some alternatives to traditional banks that are easier to open an account and offer great services.

Alternatives to When You Can’t Open a Bank Account

Looking for an alternative to traditional bank accounts is actually a way nicer journey than expected. Some of the following alternatives offer even greater services, with smoother usage and better deals. Thus, let’s take a look at some options.

Online Banks

Usually, online banks’ accounts have fewer requirements than traditional banks’ accounts. While there will be some information being asked and verified, most digital banks offer a very easy, fast, and smooth process when opening a bank account.

On top of that, online banks can even be a better place to open a bank account than traditional banks. For starters, online bank accounts tend to offer better interest rates. In a traditional brick-and-mortar bank, the interest rate you can earn with your savings account will be around 1% to 1.25% annually. In comparison, a digital savings account can offer rates from 1.80% to 2.25%, which is, on average, 10x higher. Some online savings accounts offer even higher interest rates than that.

This is possible because online banks don't have all expenses that come with a physical location and its employees. These lower expenses allow online banks to charge you low to no fees, regardless of your account balance. In addition, many digital savings accounts have no minimum amount to open your account. Besides the financial advantages, online bank accounts offer easy access through your phone, tablet, or computer with user-friendly platforms.

Recommendation: Ally Bank

Second Chance Checking Accounts

Some financial organizations provide second chance checking accounts to consumers who do not qualify for a standard choice. Alternative accounts usually lack some benefits, such as overdraft protection or the option to avoid monthly fees. But, they do tend to provide users with the opportunity to build a strong banking history. (Be aware that while this alternative normally does not entail asking for loans, it will not assist you in building a credit history.)

If you maintain a good standing in a second chance account for 12 months, your bank may convert it to a regular checking account. When you reach that point, you may be able to look around for top-tier checking and savings accounts. However, this option is still very much attached to traditional banking.

Recommendation: Varo Bank Account

Crypto Savings Accounts

A cryptocurrency savings account allows you to participate in the cryptocurrency market while still earning interest. It is just like a regular bank savings account but focused on cryptocurrency. These accounts are usually easy to be open and extremely profitable If compared to normal savings accounts. In some, you will need to invest already in crypto. However, there are some crypto savings accounts that accept fiat currencies deposits, such as dollars. This is how it works:

For the most part, it works just like regular savings accounts. You put money into a savings account, the institution lends your money to investors, and you earn an interest rate in exchange. However, in the case of crypto savings accounts, the funds for this process will be cryptocurrency. Some crypto savings accounts even offer credit or debit cards to their clients.

So, whenever you create a crypto savings account, you are putting money into a digital currency like Bitcoin or Ethereum. Then, the savings account provider will lend your cryptocurrency to borrowers in return for a portion of interest. You will receive a share of this interest. Since there is a scarcity of money invested in crypto, with more demand than offer, the interest rates of these cryptocurrency loans are very high. That is how these crypto-based savings accounts manage to give their clients interest rates that can go as high as 12%.

To keep crypto savings accounts safe, most of them work with overcollateralized lending partners. They also use strategies similar to banks, such as distributing one investor's money throughout many borrowers, assessing investment risks, and so on. Thus, even though most of them are not FDIC insured, they do have security measures in place.

Recommendation: Outlet Finance

Prepaid Debit Cards

Many prepaid debit cards provide you access to crucial banking features like direct deposit and electronic bank transfers, which might help you save for an emergency. Customers can usually access them regardless of their banking history. Some of the finest options feature no or low monthly fees as well as access to thousands of ATMs.

Recommendation: Movo Cash

The Bottom Line

If you are unable to create a bank account, you should not be unable to access banking services. Whether you settle the account issue directly with the institution or decide to shop elsewhere, there are a number of reputable financial service providers eager to earn your business.