What is Telecheck and Why Should I Care?
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Telecheck was begun in 1964 as a group effort by several merchants to reduce or eliminate the increasing problems related to bad checks and attempting to collect them. TeleCheck, Crosscheck and ChexSystems are all service companies that track your banking account history in the same way that a credit bureau tracks your credit information and history. Unlike a credit bureau through, there is very little outside control over entries on these databases. Also unlike credit bureau reports, Telecheck does not track positive history–only negative history.
Database
The records that are developed through Telecheck’s database are accessed by merchant members or by banks that subscribe to the service in order to determine the level of risk with a new customer or with a check presented by a customer. Although most banks subscribe to ChexSystems, it can still be hard to open an account with a bank that uses Telecheck. Since more than three-quarters of credit unions and banks use services such as Telecheck, it equates to nearly 20 million people in this country who are unable to open a bank account.
Account link
If you are listed on Telecheck and attempt to pay for a purchase by check, the merchant will more than likely refuse to accept your check. The issue can also be even worse, because if you have a checking account linked with the account of someone who is on Telecheck, your checks may also be refused. You cannot demand that inaccurate information be removed; negative information can only be removed by the reporting agency or merchant.
Errors
The problem with these check guaranty services is that it can be very difficult or nearly impossible to remove the negative entry from your records, regardless of whether it is accurate or not. A bounced check can result in seven years of refusal to accept checks from you. Granted, these are extreme examples, but it is important to realize that you must protect the integrity of your banking history in the same way that you work to maintain a good credit history.
Prevention
For example, do not write checks when you are uncertain about whether there are funds in your account to cover the payment. If you deposit checks from an unknown source, allow time for the checks to clear before using funds received from those checks. Do not allow others access to your checking account unless you maintain tight controls on the transactions.
Second chance
If you have the misfortune to find your name on Telecheck or ChexSystems, you may find it helpful to review the list of non-ChexSystems banks or non-Telecheck banks. You can also take advantage of a “Second Chance Checking Account which allows you to open a new checking account even with negative items on your banking history. This generally means a higher service fee monthly, since you are assumed to be a greater risk.
No history denial
Another negative factor with TeleCheck is that you can also be denied the use of your check to make a purchase due to “insufficient history with TeleCheck merchants.”
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