What is Second Chance Checking?

Second chance checking accounts are stripped-down versions of standard checking accounts, typically with fewer features and lower spending limits. Also called "basic" accounts, they can help get you back into a bank if your credit score or ChexSystems history prevents you from opening a regular account. If you've made mistakes and ended up closing your last account in a negative balance or with outstanding fees, it may be difficult to start over at a new bank. Fortunately, second chance checking is just that: an opportunity to rebuild your banking record.

When to Consider Second Chance Checking

Whenever an account holder makes a mistake, such as failing to pay an account fee, causing an overdraft or writing a bad check, the bank may take notice and report him or her to ChexSystems. ChexSystems is a consumer reporting agency that creates records of individuals based on their banking history. Repeated errors can land you on the ChexSystems list of risky prospects, and many banks will refuse to approve you for a new account if they find your name on that list.

Personal credit score is another factor that banks can look at when you apply for a new account. Credit score is more relevant to loans and credit cards than checking accounts, but it can be affected by your banking habits in certain cases. For instance, if you opt into overdraft protection that draws from a line of credit or credit card rather than a savings account, any overdraft transfers can cause your checking account to show up on your credit report.

If either your credit score or a ChexSystems record is blocking your efforts to restart your banking, second chance checking is a good place to start looking. Not all banks provide such accounts, but those that do recognize and accept the fact that consumers looking for second chance accounts won't have the best scores. As a result, second chance checking accounts can be easier to open; however, they differ from typical accounts in a few significant ways.

How Second Chance Checking Works

In general, you can think of a second chance checking account as a more restrictive version of the standard checking account. Banks design these accounts with only the most essential functions, in order to balance the customer's financial needs with their own need to reduce the risk of the customer becoming delinquent. You may find one or more of the following in a second chance account:

  • Lower but unavoidable monthly fees
  • Lower withdrawal and debit limits
  • No overdrafts or overdraft transfers
  • No check writing

You'll find that the second chance option at a bank usually has the same or lower monthly maintenance fees than the standard checking account, but oftentimes the fee waiver options will be missing. Therefore, you'll pay a lower fee each month, but there won't be any way to avoid the charge, as there would be with a normal account. Other account fees may follow the bank's standard rules, but you should also take a look at those to see if the bank charges differently in the case of second chance accounts.

Second chance checking also tends to prohibit overdrafts. For instance, Bank of America's SafeBalance Banking account will automatically decline all transactions that exceed your balance, with no overdraft fee or overdraft protection transfers. The account actively protects you from going into the red simply by removing your ability to do so. In the same vein, second chance accounts often impose lower daily limits on the amounts you can withdraw from ATMs or spend on your debit card. This makes it less likely that you will empty your account by accident.

Another common limitation on second chance checking accounts is the inability to write checks, which are often a source of trouble when people lose track of how many they are writing relative to their balance. Banks avoid issuing checks to account holders with second chance checking as a way of preventing overdrafts and bounced checks.

Where to Find Second Chance Checking Accounts

While most of the nationwide banks such as Chase do carry basic accounts, they don't always make it clear whether or not those accounts are easier to open for people with flawed banking histories. Among these large banks, only Wells Fargo openly advertises a designated second chance checking account, called Opportunity Checking. It's often worth calling or meeting a banker to ask directly whether or not they have a second chance account option.

If you find it difficult to find an appropriate choice among the larger banks, you may find better options at regional or community banks in your area. With their small-batch approach to customer service, such banks may be more willing to work with you on an individual basis even if they don't offer an official "second chance" product. Credit unions also offer second chance checking accounts as a way to attract dissatisfied bank customers, so it may be worth a little research to see if there are any you qualify for.

Alternatives to Second Chance Checking

Second chance accounts are a good way to get started (or restarted) with a bank, but if you don't need or want to conduct your business through a bank account, prepaid debit cards can serve as an alternative. These may be used much like regular debit cards, except that they are not tied to a checking account. Instead, you must load funds into a prepaid debit card prior to using it, and you cannot use more money than is available on the card.

A growing number of companies not involved in traditional banking, such as American Express, are offering prepaid debit cards. Because they are relatively new, prepaid debit cards come with different fees, rules and protections compared to traditional bank accounts, and they lack many of the money management features that are increasingly common with online and mobile banking apps.

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