Opening a second chance bank account can be a way for you to access banking services and rebuild your banking history if you’ve been denied a checking account in the past due to banking issues.
What Is A Second Chance Bank Account?
Second chance bank accounts are for people who were denied a regular account due to past financial challenges. They offer basic services like a debit card and online banking and are typically offered by only a few banks and credit unions.
Banks and credit unions rely on a bank reporting agency called ChexSystems and many use this information to determine whether someone is eligible for an account. People may have to rely on second chance bank accounts if they have a history of financial difficulties that have led to negative items on their banking record, such as unpaid overdraft fees or bounced checks.
You can also choose a bank or credit union that does not rely on ChexSystems when evaluating new customers. These financial institutions are known as non-ChexSystems banks or credit unions.
Whichever option you choose, we’ve got you covered. We’ve selected the best second chance bank accounts based on acceptance rates, checking account features and benefits, and the accounts with the lowest fees. Best of all, you can open an account today!
Our Top Picks: Second Chance Bank AccountsOpen an account today!
Who Needs a Second Chance Banking Account?
Banks often refuse to open checking accounts for consumers who are considered a “bad risk.” You could be considered a bad risk for things like bouncing checks (which can be accidental), writing bad checks (a deliberate act), having a low credit score, or simply breaking a bank’s rules by exceeding the daily ATM withdrawal limit or frequently transferring money between accounts.
Many of these activities result in fees being charged to your account and if you have too many fees or are not paying the fees due to a low account balance, you may be considered a bad risk for a bank.
You might think you can get around this by switching banks, but banks use information collected by reporting agencies like ChexSystems, TeleCheck, or Early Warning Services (EWS). These companies are similar to the credit reporting agencies that gather consumer data to compile a credit report.
Just as a bad credit report can mean you’re denied a credit card or a personal loan, a bad banking report can mean you’re denied a checking account. That’s where second chance banking comes in.
Our research shows that there are some very competitive checking accounts for people who need a second chance. That includes robust checking accounts with mobile and online tools, great customer service, no or low monthly fees, and very high approval rates.
What to Look For in a Second Chance Banking Account
Don’t settle for second chance bank accounts with tight restrictions and controls while also demanding high fees. This is a trap too many people fall for because they don’t know where to find a good second chance banking account or have been told to go to a payday loan or a check cashing company. When you’re shopping around, look for things like:
- No minimum balance required
- Low or no monthly fee
- Ability to write checks
- Online and mobile banking
- Debit card access
What Is ChexSystems?
Most consumers aren’t familiar with ChexSystems until they’re denied a new bank account or a merchant declines to accept their check. Briefly, ChexSystems is a consumer reporting agency (CRA) that tracks your checking and savings account activity.
It’s similar to the three major credit reporting agencies (Equifax, Experian, and TransUnion) which collect data on consumers’ loan and credit card history. A ChexSystems record doesn’t affect your credit score and doesn’t factor into banks’ decisions to extend credit, but it can impact your ability to open a bank account or write checks. And in today’s tech-forward world, having access to a checking account for a host of services is critical.
ChexSystems is not responsible for the decision made by banks to deny you a bank account; however, the information reported by banks and credit unions and stored by ChexSystems can result in a denial of a bank account.
The following information may be stored in your ChexSystems report:
- Paid and unpaid insufficient fund items (“NSF”)
- Any kind of fraud
- Uncollected overdrafts, ATM transactions, or automatic payments the bank paid
- Abuse of debit card, savings account or ATM card
- Violation of any banking rules and regulations
- Opening an account with false information
There may be additional reasons a bank reports their customers to ChexSystems, but the above list represents the most common reasons consumers end up in ChexSystems.
What Is Early Warning Services (EWS)?
EWS was created by major banks including Wells Fargo, Capital One, BB&T, JP Morgan Chase, and Bank of America to prevent fraud and reduce risk. Whereas companies such as ChexSystems and TeleCheck focus on keeping records of people who mismanage bank accounts with overdrafts or writing checks on closed accounts, EWS focuses on fraudulent activity.
Its database tracks consumers’ negative interactions with banks, as well as activities such as bank fraud, forgery, check kiting, check alteration, and counterfeiting.
What is Telecheck?
Like the credit bureaus, ChexSystems, and EWS, Telecheck is a consumer reporting agency (CRA) that focuses specifically on consumer information related to checks and bank accounts.
Retailers use Telecheck to determine how risky it is to accept someone’s check, making a decision on the spot whether or not they’ll accept it as payment. If a check is approved by the Telecheck system, the merchant is guaranteed that they’ll get the full amount of the approved check.
Some banks and other financial institutions use Telecheck when deciding whether or not they should allow a consumer to open a checking account. This is done in an effort by financial institutions to reduce fraud and minimize risk as much as possible.
What’s the Difference Between a Second Chance Banking Account and a No-ChexSystems Bank Account?
There is a difference between a second chance banking account and a bank that does not use ChexSystems. Here’s why it’s important:
If you are on ChexSystems and are unable or do not have the time to dispute the negative information, you will want to find a bank that does not use ChexSystems as part of their checking account screening process. Be aware that the bank may perform a quick check on your credit score, and they may use EWS to make sure you have not engaged in fraudulent behavior. These kinds of banks and credit unions are very rare and difficult to find. Our top pick for this group is Chime.
Banks offering second chance bank accounts will almost always refer to ChexSystems during the approval process. And they may also use EWS and Telecheck. However, generally, they are prepared to open an account as long as you don’t owe their institution money.
Approval rates for these accounts are high and you’ll enjoy most of the banking options you would expect with a ‘traditional’ checking or savings account.
Again, finding these banks and credit unions is hard. The staff here at CheckingExpert.com has reviewed over 1,000 different checking accounts and we have the most comprehensive and accurate list of second chance bank accounts available.
Is Second Chance Banking a Better Option Than a Prepaid Card or PayDay Loans?
The right second chance banking account is far more convenient and less expensive than using alternatives like check-cashing businesses, payday loans, and pre-paid debit cards.
Payday lender loans and cards feature a slew of gotchas and fees—even for on-time payments. These types of financial products have been identified as some of the worst available for consumers.
After comparing the pros and cons of each option, the choice seems fairly clear: a second chance banking account with a bank debit card is still a superior option for most consumers.
The ease and convenience of adding money to your checking account without any hidden fees, the consumer protections attached to these cards, and the freedom to spend your money immediately makes them a great option for anyone looking to create a healthy financial lifestyle.
Frequently Asked Questions About Second Chance Banking
Can I live anywhere in the United States to apply for a second chance banking account?
Our top second chance banking recommendations offer accounts to residents in all 50 states and Washington DC.
What information will I need for the application process?
You will need your social security number (or individual tax ID number). In some cases, the bank will ask questions during the application process to verify your identity.
What’s the likelihood that my application will be accepted?
We’ve selected these banks based on their extraordinarily high acceptance rates. Our informal surveys indicate an acceptance rate of about 95 percent.
Do these banks require an initial deposit to set up the account?
Several of the top second chance bank accounts do not require an initial deposit when applying for an account. This means you’ll have access to the bank account and routing number as well as recievie your debit card before ever having to deposit money into the account.
Will I receive a pre-paid card or a checking debit card?
None of our top second chance bank accounts come with a pre-paid card. They only offer Visa or MasterCard debit cards which are linked directly to your checking account. These debit cards will allow you to select a personal identification number (PIN) and have the full buying functionality that comes with the Visa or MasterCard networks.
With that being said, there are some second chance bank accounts that only offer ATM cards. These cards can only be used to deposit and withdraw cash at ATMs. If that’s the case, it will be clearly noted in our breakdown of the checking account.
Are second chance bank accounts FDIC insured?
All of the banks on our list offer FDIC-insured checking accounts. That means the federal government insures the money in your account up to $250,000.
What if I want to bank locally so I have access to a branch office?
The CheckingExpert.com editorial staff has reviewed bank checking accounts in all 50 states and has outlined those banks and credit unions in each state that offer second chance banking accounts. That list is provided below and updated regularly.
The Best Second Chance Bank Accounts in Every State
Unfortunately, most major banks don’t offer second chance banking accounts, but many community banks and credit unions have them under various names, such as Opportunity Checking and Fresh Start Checking.
Our staff regularly updates the list of banks offering second chance banking in every state. Here’s an overview of these accounts and where you can find them at branches in your area.
If you’ve experienced issues with credit card debt, checking account issues, or bounced checks, CheckingExpert.com can help you get back on track toward a healthy financial future. Our goal is to guide you through the complex financial roadmap to find the banks or credit unions that can best meet your needs.
The vast majority of the time, you can get a bank account with ALL the features and benefits you need with no fees, minimums, or restrictions. We’re glad you found us. Now, let us help you find the right financial partner for you.