Direct deposit without a bank account or... ?
August 17, 2021 10:31 AM   Subscribe

A friend is asking for advice on the following situation: the last time they had a bank account (over a year ago, I think) they accidentally overdrafted the account by several hundred dollars. Friend payed back some of the money but was not able to pay it all due to being unemployed much of last year. They recently got a new job that will only issue their paycheck by direct deposit.

They contacted the bank to see if they would reactivate the account, thinking that their first couple of paychecks would cover the amount of the arrears and then the account would be good to go. But the bank said the account was permanently closed and the debt was sent to collections.

Friend thinks they will not be able to get an account at another bank because of the situation. I'm wondering if this is true? Are there any banks that will allow them to open a savings they can use to have a check direct deposited to? Or any other possible solution, other than that friend is just unemployable now since most employers require direct deposit? I'm sure this can't be all that rare of a situation. Friend is in Wisconsin if that makes a difference.

Any advice?
posted by Serene Empress Dork to Work & Money (20 answers total) 1 user marked this as a favorite
Has your friend tried opening an account with another bank or a credit union? I would try with another bank and if they won't let him open have him ask what he can do to fix the situation. There is just no way a similar situation has never happened before.
posted by Constance Mirabella at 10:58 AM on August 17 [8 favorites]

Friend thinks they will not be able to get an account at another bank because of the situation. I'm wondering if this is true? Are there any banks that will allow them to open a savings they can use to have a check direct deposited to? Or any other possible solution, other than that friend is just unemployable now since most employers require direct deposit?

I do not believe friend is correct. There isn't a credit check required to open a bank account, there is literally no way someone would know that friend had an issue with another bank. Advise friend to try opening another bank account with another bank or credit union (CUs often have better personalized service but this may be variable) and see what happens before they start doom spiraling on this.
posted by jessamyn at 11:04 AM on August 17 [13 favorites]

Many banks and CUs use ChexSystems and a couple competitors when opening accounts to look for past problems as well as suspicious behavior such as someone opening lots of accounts on the same day. These are not traditional credit reports. I’m guessing that’s what your friend is referring to.

That said, your friend should just try to open another account anyway. I recommend trying credit unions as if they’re flagged they’ll have a better chance to talk to someone with override authority. Someone who cares should approve this, I’d think.
posted by michaelh at 11:22 AM on August 17 [15 favorites]

Literally just opened a bank account with a family friend who has a bad overdraft history the other day. Banks do not run a credit check when establishing a new account (they ask for your SSN for KYC/AML reasons). They may decide not to offer you "overdraft protection" especially if you don't deposit any money into the account at first -- but you don't want it anyway.
posted by goingonit at 11:24 AM on August 17 [1 favorite]

Another option (not as good as a bank account but still surprisingly good) is Cash App which does give you a routing/account number for direct deposit.
posted by goingonit at 11:26 AM on August 17 [5 favorites]

There’s no reason the bank account used for direct deposit has to be in your friend’s name, is there?
posted by kevinbelt at 11:27 AM on August 17

What you're looking for is called a "Second Chance" account.
posted by Medieval Maven at 12:20 PM on August 17 [5 favorites]

I would imagine "I want to direct deposit my paycheck" is actually exactly what banks want to hear if you are opening an account & they're a little worried about your history.
posted by february at 1:37 PM on August 17 [2 favorites]

I recently opened an account on Chime in order to pay some sketchy internet seller, and Chime gives you all the info you need for direct deposit. In fact they seem to REALLY want you to set up direct deposit -- I'd be shocked if they turned your friend down.
posted by nixxon at 2:16 PM on August 17

I do know someone who was denied a savings account due to an outstanding debt to a landlord - and this was with a credit union. It does happen but it is worth shopping around.

I suggest your friend find a credit union that they qualify for and try to open an account with them online. That way if something happens and they get rejected, they don't have to hear that news face to face.
posted by soelo at 2:17 PM on August 17

Response by poster: Hmmm. My friend tried to set up an account with Chime and was turned down. The denial notification said their member service team was unable to provide any further information for "security reasons."
posted by Serene Empress Dork at 2:45 PM on August 17

Hey there, I do payroll. Depending on the state your friend lives and works in (not where the employer is HQd but where your friend works, resides, and pays taxes), the employer may not be allowed to require direct deposit.

Now, this is a logistical nightmare* when you have remote employees, so I certainly prefer and encourage folks to set up DD, but wishing doesn't make it so. And it's going to be in your friend's best interest to get their bank account issues sorted so they can comport themselves through society without it being a major pita. BUT--if they are in one of the states on this list where DD can NOT be mandated by the employer, I would push back.

*Most of the large payroll companies have a pay by debit card option. Takes a minute for you to get the debit card at first, but then it's reloaded automatically on payday with your wages. This is the most convenient. But paper checks are a terrible hassle. The paper checks are going to arrive to the employer at their HQ office the day before payday, and then someone has to be there to check the mail, sort it, put your check into an envelope, and then mail it out to you wherever you are, adding more days and the risk of mail delivery sucking into the process. Basically you will always be paid late, which employers hate to do because that's like real bad not to pay people on time, so paper checks are the worst. Our payroll provider is the top in the world, and the only just added a mail-the-check-to-the-employee option because of covid.
posted by phunniemee at 2:52 PM on August 17 [10 favorites]

You may need to go to a bank or credit union's physical branch or talk to someone on the phone. I wouldn't expect an automated sign-up to be successful under your friend's circumstances.
posted by Aleyn at 2:54 PM on August 17

Credit union every time. There is no better bank than one you part-own.
posted by flabdablet at 5:05 PM on August 17 [1 favorite]

Cash App works if there aren't any better options. You can get a physical card that can be used in stores and such. There are also prepaid debit cards that have direct deposit features. The one I used to have was zero fee as long as you had at least one ACH deposit a month and had fee-free cash withdrawals from one of the big ATM networks. Sadly, it went away a few years ago, but there are others I was looking into.

Still, it's much better to have an actual bank account if at all possible. Given the relatively small overdraft amount, I expect it should be possible to find one that will open an account for your friend, especially if they have an offer letter or something in hand.
posted by wierdo at 8:59 PM on August 17 [1 favorite]

There isn't a credit check required to open a bank account

Some do. I know Ally is one, at least as of 2012. However, most do not.
posted by Candleman at 9:42 PM on August 17

Revolute enables direct deposit and comes with a debit card to access funds and to pay bills. I would do that as an immediate solution to this issue because it just takes a day.

If establishing a real bank account is really an issue, I would then open a savings account at a credit union and pay in a set amount every month from Revolute. Then after six months I'd ask for a regular account.
posted by DarlingBri at 6:20 AM on August 18 [1 favorite]

If you trashed a checking account, it's going to be at least 5 years before any bank will serve you. Instead, get a pre-paid VISA or Master card that takes deposits. My sister had the same problem and this worked out pretty well. You just have to keep a close eye on fees.
posted by james33 at 6:52 AM on August 18 [1 favorite]

Some weird, Wisconsin specific advice: If your friend isn't able to just open a new account at a national bank (I'd suggest trying Wells Fargo first if that wasn't the bank they were using when they had the overdraft issue), either call or stop in to a branch of the UW-Credit union, explain the situation and ask for advice on what to do next. Even if they aren't able to open an account for your friend, I've found their customer service people to be VERY helpful, resourceful and willing to give advice about how to fix this kind of problem, even if UW-Credit Union itself can't be part of the immediate solution. They have a "financial education" component to their mission, and in my experience, they take this pretty seriously.
posted by mjcon at 8:27 AM on August 18 [1 favorite]

Good grief, don't use Chime. It's neither licensed nor insured as a bank. They have been freezing a lot of customer's accounts. I know a lot of unbanked people have been using it, but those folks are also the most vulnerable to not being able to access their money for 30 days.
posted by oneirodynia at 6:57 PM on August 18 [3 favorites]

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