Are you trying to turn your financial life around?
If you’ve had some money problems or bad credit in the past, you might have trouble finding a bank that’s willing to let you open a checking account or savings account.
But you don’t have to resign yourself to the inconvenience of paying for things with cash. A second chance bank account might be just what you need.
Second chance banking programs are designed for people who have been denied services at other banks and financial institutions. Most people who open a second chance banking account are not eligible for traditional banking or credit union accounts due to their record with one of the four major companies that track checking account-related information:
These companies work like credit rating bureaus, but they don’t track your use of credit cards and loans, or track your credit score. They monitor and report on things like overdrawn accounts and bounced checks.
If your checking account consumer report reveals several negative items, your application for a traditional checking or savings account may be denied from a financial institution. That's when a second chance account may be a good alternative.
2nd chance bank accounts have less restrictive approval requirements than a regular checking account. They help people get back into the banking system and rebuild their banking history. While checking accounts are the most common type of second chance account, some financial institutions offer second chance savings accounts as well.
The approval requirements for a second chance checking account aren't as stringent as those for a standard checking account, but these accounts often come with limitations and rarely offer perks.
Many banks and credit unions offer second chance bank accounts, so it's a good idea to shop around to find one that will give you more features at a lower cost. Here are a few nationwide options for you to compare before opening your next bank account.
If you have trouble finding a 2nd chance banking account from a nationwide bank, you might find better options at local banks or credit unions in your area. Ask your local financial institution for details.
Keep in mind, some banks and financial institutions will deny an account application from someone with a history of bank or checking fraud on their record. If you have trouble getting approved for a second chance checking account, here are a few alternatives.
Try Chime Bank. Chime is one of many online-only banks and one of the few accounts that doesn’t run a ChexSystems report as part of its approval process, so that might be a good option if you’re having trouble getting approved elsewhere.
Give it time. Information is typically removed from your ChexSystems report after five years. If you can’t get approved for a second chance bank account due to fraud, wait until the negative information falls off of your report and try again.
Use a prepaid debit card. A prepaid debit card isn’t linked to a bank account. It allows you to load money onto a card and use it to pay just as you would make regular debit card purchases.
You can typically buy prepaid debit cards at most grocery stores, warehouse stores, and pharmacies. Before you purchase one, check out the fees, which should be disclosed on the outside of the packaging. Prepaid cards may charge a monthly fee or service fee, a per-purchase fee, and a fee to reload the card.
Second chance bank accounts are just what they sound like: a second chance to demonstrate that you can use a checking or savings account responsibly, even if you had financial troubles in the past.
If you’re approved for one of these accounts, take advantage of the opportunity. Keep a close eye on your balance and avoid overdrafts. If you do it right, eventually, your bank will be willing to upgrade your account to one with lower fees and better features.
Janet Berry-Johnson is a Certified Public Accountant and freelance writer with a background in accounting and insurance. Her writing has appeared in Forbes, Freshbooks, The Penny Hoarder, and several other major outlets. See Janet on Linkedin and Twitter.
Lauren Bringle is an Accredited Financial Counselor® and Content Marketing Manager with Self Financial – a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.