It's More Important than Ever to Track Every Penny

Here's a post from the "Big Brother" school of finance. I found an article titled What the Banks Know about You (but won't tell you) and Why It Matters that is summarized as follows:

"Third-party databases, similar to credit bureaus, are keeping track of overdraft information and creating debit scores, which can be used to deny checking accounts."

Here are the details:

"Companies that operate private data banks are tracking your banking behavior - and most banks and retailers are happy to tell them when you slip up. One company even crunches the details into a debit score. It's like a credit score, but instead of getting you turned down for a credit card, a low score might mean you can't open a checking account. And, unlike the credit score, you're not allowed to know your debit score."

Why is this happening and what's the result:

"The point is to reduce bad check losses, a $30-billion problem for banks last year. The downside is that consumers who end up blacklisted by ChexSystems can have difficulty opening an account for up to five years."

This looks like a process that's a problem just waiting to happen. For example:

"The cardinal sin in ChexSystems' world is to owe a bank money. Banks report customers to ChexSystems for overdrafts as small as $36, typically after giving a customer 45 days to pay, according to a survey four years ago by the National Community Reinvestment Coalition. Even if the bank is eventually paid, the negative notation stays on a customer's ChexSystem record for five years. By contrast, debts to retailers as a result of bad checks are typically removed from databases shortly after they are paid.

The coalition said its survey found that most banks rejected customers who had any negative information in ChexSystems and failed to consider an account applicant's employment history, rent payment history or other variables."

In short, simply keeping close track of your money and expenses (including balancing your checkbook every month) should keep you out of trouble like this. It used to be that even if you slipped up once in awhile, it wouldn't harm you financially. With systems like the one described above starting to develop, even one slip today can have dire consequences for years to come.