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Banking 101: Second Chance Banking - Savings and Checking Accounts That Won't Turn You Down


Written by Alicia Bodine | Published on 2/21/2019

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

When you apply for a new savings or checking account, it’s common for the financial institution to check your history with a consumer reporting agency, such as ChexSystems. If the bank finds any negative reports, such as accounts that were closed due to unpaid balances or fees, or accounts with fraudulent activity, they may deny your application.

Inaccurate reports can be disputed. However, if the information is correct, you may have trouble opening a standard checking or savings account. This is where second chance banking can help. These second chance bank accounts can be used while you rebuild your credit.

In this article we will cover:

What is second chance banking?

Not having a bank account can be costly. For example, every time you need to cash a check at a check cashing store, you’ll be subject to a fee. Or, you’ll need to pay a monthly fee just to have a prepaid debit card. Second chance banking is an excellent alternative to having no bank account at all and without those extra fees.

Second chance banking is for individuals who have a less-than-perfect banking history who would benefit from a second chance at rebuilding their reports. Accounts are designed to help users get their finances where they should be so that they can develop a pattern of good money management.

Before deciding if second chance banking is right for you, it’s helpful to examine the pros and cons.

Pros

  • Can typically upgrade to a traditional account after a year of positive activity
  • Can set up alerts to notify you when funds are getting low
  • Accounts can be easily monitored online or on a mobile device
  • After 5 years of proper account management, your ChexSystems report will be clean

Cons

  • Will have to pay a monthly service fee in most cases
  • Some companies charge extra fees, such as account and debit card setup fees
  • Several financial institutions don’t allow checks and debit cards with this type of account
  • Many banks won’t issue a second chance bank account if fraudulent activity caused by you was the reason for the negative report

How to open a second chance bank account

To open a second chance bank account, you’ll first want to compare the different account options. Try to find offers with low minimum deposit requirements, such as Wells Fargo’s $25 initial deposit versus Unity One Credit Union’s $50 minimum.

Next, compare the monthly maintenance fee before checking for any additional fees, like setup, ATM withdrawal and insufficient funds fees. Finally, determine whether you can meet your financial needs with an electronic-only account, or if an account with checks and a debit card would be more ideal.

When it comes to filling out the application, there are a few things you’ll need to provide. Most financial institutions require a copy of a current and valid government-issued photo ID that lists your address. If the ID address doesn’t match your present address, you’ll also need to submit a pay stub or utility bill for further verification. Review the application to ensure the information is correct before signing and dating it. Hand in the application along with the required minimum deposit and await a decision.

Second chance checking and savings accounts

Here are a few second chance bank accounts worth considering if you’re ready to open a new savings or checking account.

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Wells Fargo Opportunity Checking

Wells Fargo Opportunity Checking offers low account balances with a small $25 initial deposit requirement. While the bank charges a $10 monthly service fee, it waives that fee if customers use their debit card at least 10 times, make deposits of $500 or more or hold a $1,500 minimum account balance throughout the month. Additional fees associated with this account include a $35 overdraft fee, $15 to $30 wire transfer fees and $2.50 to $5.00 non-Wells Fargo ATM charges.

Opportunity Checking customers are provided with an online account with mobile access and the ability to keep track of their spending through “My Spending Report with Budget Watch.” Checks and a debit card are included, and there’s the chance to sign up for an Opportunity Savings account and Overdraft Protection.

Corporate America Family Credit Union Fresh Start Checking

Although Corporate America Family Credit Union has a Fresh Start Checking account for individuals who need to rebuild their checking history, they have three requirements for this account. Applicants must be members of Corporate America Family Credit Union, have at least $100 in their Regular Share Account and be willing to pay a $10 monthly service fee.

As an added bonus, the financial institution provides a complimentary online study course called “Get In Balance” to aid customers in using their checking accounts successfully.

Peoples Cash Solutions Second Chance Checking

As long as you don’t have any reported cases of fraud by another financial institution, you can apply for a Peoples Cash Solutions Second Chance Checking account. This FDIC-insured bank charges a $4.95 monthly maintenance fee and requires a $30 initial deposit, but the account comes with both checks and a debit MasterCard.

There’s a $2 charge each time you use an ATM not owned by Peoples Cash Solutions and a $27.50 fee for each overdraft. Electronic statements are free, but paper statements cost $3.95.

Once approved, customers are sent a welcome packet within seven to 14 business days that contains a checkbook, a debit Mastercard and information on how to access online banking.

BBVA Compass Easy Checking

Customers who don’t qualify for Free Checking with BBVA Compass can apply for Easy Checking, which has a $25 initial deposit requirement. This account comes with complimentary online and mobile banking, and alerts that let you know when your account balance is getting low.

Users can offset the $13.95 monthly maintenance fee by using their free debit card with cashback rewards. Account holders have unlimited check-writing privileges and the opportunity to opt for electronic statements to avoid the $3 paper statement fee. There’s also a $25 fee for early account closures, a $38 insufficient funds fee and a $3 out-of-network ATM fee.

After 12 months of an active account with a positive balance, Easy Checking customers are eligible to request an account upgrade.

Woodforest National Bank Second Chance Checking

Woodforest National Bank has a Second Chance Checking program for customers who have faced challenges in the past. The company has branches in Alabama, Florida, Georgia, Kentucky, Louisiana, Illinois, Indiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia.

Applicants will need to provide a $25 minimum deposit and a $9 one-time setup fee. While account holders will be able to use checks and a debit card, it is important to note that this account comes with a host of fees. These include monthly maintenance fees between $9.95 and $11.95, a non-Woodforest ATM fee of $2.50, a debit card setup fee of $15, an insufficient funds fee of $29 and a paper statement fee of $3 (unless you opt for e-statements instead).

Unity One Credit Union Clean Start Checking

Unity One Credit Union welcomes applicants for its Clean Start Checking who don’t have a record of fraud, more than two account closures, $1,500 balances still owed or losses they’ve caused Unity One Credit Union to incur.

While there are no account minimums, customers will need to provide a $50 opening deposit. Monthly service fees range from $10 to $15, depending on whether you utilize direct deposit. Paper statements and Online Bill Pay are complimentary, as are the alerts and notices you can opt in for to help you better manage your account.

After 12 months of responsible checking account practices, one can apply for the company’s Free Checking.

Western Region Federal Credit Union Electronic Only Checking

Western Region Federal Credit Union has an Electronic Only Checking account for its members.The good news is there are no charges to open or maintain this account. The bad news is you don’t get checks or a debit card. The account is strictly electronic only.

Customers can utilize direct deposit for their paychecks or benefit payments and bill pay to stay up to date on household expenses. Direct withdrawal is also an option if you need quick access to the funds in your account.

Montgomery Bank New Start Checking

If you live in Missouri, you’ll want to take a look at the Montgomery Bank New Start Checking account. The account is designed for individuals who have been turned down for checking from other banks and only requires a $20 minimum opening deposit. Customers are never charged a monthly maintenance fee, don’t have any account minimums to worry about and have access to free online banking.

The account comes with unlimited check writing and free ATM transactions when using your debit card at any MoneyPass ATM. Online bill pay is also included.

Foothill Credit Union Rebound Checking

Foothill Credit Union members who work in San Gabriel Valley, Calif., can apply for the company’s Rebound Checking account. The account requires members to keep a minimum balance of $50 or a $10 fee will be charged. This is on top of the $6 monthly maintenance fee.

On a positive note, Mastercard debit cards are issued for free and checks can be purchased at a cost. There’s never a fee for monthly e-statements or for using the online bill pay feature.

Chime Bank

Chime Bank is different in that it doesn’t have a specific second chance bank account. Instead, it doesn’t bother with credit or ChexSystem checks, making it easier for applicants of all types to qualify.

With each spending account, users are issued a free Visa debit card that can be set up to issue transaction alerts and daily balance reminders. Banking is done using the Chime Bank’s mobile app.

There are absolutely no fees associated with the account, which means all of your money is available for important things like paying bills. You don’t even need an opening deposit or adhere to a minimum account balance. If you choose to set up direct deposit, you can get your paycheck up to two days early. There’s also the option to get a free savings account as well.

The bottom line on second chance banking

Second chance banking gives individuals a way to rebuild their banking history so that they can eventually switch to a traditional account in the future. Since financial institutions vary greatly in their deposit requirements and fees, it is important to do your homework before choosing the account that best fits your needs.

Comments


mffarrell
mffarrell   |     |   Comment #5
ChexSystems really ****ed me from opening new CDs and MM accounts by giving me a low score, even though I have a 800 plus FICA credit score and no debt.

The low ChexSystems score is due to opening too many ned CD and MM accounts. I can't understand why banks pull a credit report when I loan them money? It makes no sense. I now avoid banks who do this process.
deplorable 1
deplorable 1   |     |   Comment #6
I open a ton of bank accounts and CD's all the time and never had a issue with ChexSystems. You must have overdrawn accounts or bounced checks or something that caused them to red flag you in some way. I agree that nothing should be pulled when we are essentially loaning them our money. I don't like how they ding your credit score for applying for credit either. What's wrong with applying for credit? Isn't that the purpose of having a credit score?
mffarrell
mffarrell   |     |   Comment #7
I don't have any bounced checks (I don't use checks, only cashier's checks) or overdrawn accounts. ChexSystems told me the reason was I had too many inquiries over a short period of time which knocked my credit score down. For example, I opened 5 CDs with PurePoint, and they did 5 seperate inquires with ChexSystems on the same day! WTH? Also, Bank5 did two inquires on the same day!

So for now on, I check to see if my credit is pulled before I pull the trigger on a CD.
DCGuy
DCGuy   |     |   Comment #8
Any person who performs a lot of financial activities over a short period of time is looked upon with suspicion. For example, if you went to Target and every day for a month kept buying motor oil and kept going back for a refund for a month, you are likely to get flagged. It is still legit what you did, but your customer profile will suffer.
deplorable 1
deplorable 1   |     |   Comment #9
Wow that sounds crazy. I do try to space my banking activity out as much as possible though. You never know who is watching and apparently someone is always watching.
#11 - This comment has been removed for violating our comment policy.

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