What Is Second Chance Checking?

Second chance checking is an option for consumers who have been denied a traditional checking account because of a troubled banking history.

Everyone Needs a Checking Account

It’s tough to navigate today’s world without a checking account. When you don’t have a checking account, it can be harder and in some cases more expensive to do things like pay your bills and cash or deposit your paychecks. Being denied a checking account also means your money is less secure as a checking account is a safe place to keep your money.

But not everyone has access to a traditional checking account. Banks have a set of criteria that consumers must meet before being allowed to open a checking account. If you can’t meet them, you can feel left out in the cold.

Who Needs a Second Chance Checking 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 is accidental), writing bad checks (a deliberate act), having a low credit score, or 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. 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 loan, a bad banking report can mean you’re denied a checking account.

What is a Second Chance Checking Account?

If your banking history is less than ideal, a second chance checking account may be the answer for you. Some banks and credit unions offer second chance checking accounts for consumers in this situation that not only give them access to a checking account but can help repair their banking history.

Second chance checking accounts often don’t come with the same services that traditional checking accounts offer and sometimes have mandatory monthly fees and requirements consumers must adhere to.

Second chance checking accounts are bare-bones versions of regular checking accounts. They’re meant to meet the customer’s basic needs while minimizing the bank’s risk. These restrictions and requirements are meant to prevent bad banking habits from happening in the future.

Some features may include low but mandatory monthly fees, low withdrawal and debit limits, no overdraft protection, no check writing, required direct deposit, and a mandatory money management class.

While these requirements and restrictions may not sound ideal, they are often more convenient and less expensive than using alternatives like check-cashing businesses, payday loans, and pre-paid debit cards to meet your needs. And if you can adhere to the guidelines set by the bank, you can sometimes transition to a traditional checking account after a period of time, often six months to a year.

What to Look For in a Second Chance Checking Account

While you’re not going to get the same perks with a second chance checking account that you would with a traditional checking account, some are better than others. When you’re shopping around look for things like:

  • No minimum balance required
  • Low or no monthly fee
  • Ability to write checks
  • Online banking
  • Debit card access

>> MORE:  Need a Fresh Start? Here’s The BEST Second Chance Checking Account. No Minimums, No Monthly Fees, and a Free Visa Card!

Where to Open a Second Chance Checking Account

You can find a second chance checking account nationwide and online which may be the most convenient option. The accounts may be called something different like essential checking, opportunity checking, and fresh start checking.

Many of the “big name” banks don’t offer these accounts and consumers who have had bad banking experiences may prefer to work with smaller community banks or credit unions. Those types of smaller institutions often offer more services and better customer service than their larger counterparts.

The researchers at CheckingExpert.com have looked at over 1,000 different checking accounts offered by banks and credit unions throughout the United States. Here’s an overview of these accounts and where you can find them in your area.

ConnecticutDelawareDistrict of Columbia
NebraskaNevadaNew Hampshire
New JerseyNew MexicoNew York
North CarolinaNorth DakotaOhio
Rhode IslandSouth CarolinaSouth Dakota
West VirginiaWisconsinWyoming

Everyone Deserves a Second Chance

Don’t be discouraged if you find yourself on the banking “naughty list.” Banks are in the business of making money and one of the ways they do that is by charging fees. If you’re already struggling, those fees can pile up and make things worse and get you blacklisted from traditional banking.

But a checking account, be it a traditional or second chance checking account, is preferable to the expensive, inconvenient alternatives. And a second chance checking account can give you the opportunity to rebuild your banking history and transition to a traditional account with more perks and fewer fees. Find the second chance checking account that’s right for you. Because everyone deserves a second chance.