Everything You Need to Know About Second-Chance Checking Accounts

Is there really such a thing as a second chance in the world of personal finance?

Some banks seem to think so. In fact, certain institutions are willing to help people with troubled credit histories start to build up their financial futures by offering second-chance checking accounts.

Of course, these accounts don’t come with all the features of traditional checking accounts. You may have to jump through some hoops to get back into the good graces of the banking world.

However, a second-chance checking account could help you to build a brighter future and erase some unfortunate or irresponsible behaviors that have left marks on your banking history. Let’s take a look at everything you need to know about second-chance checking accounts.

Why Second-Chance Checking Accounts Are Necessary

The traditional banking world could shut you out for a number of reasons.

Banks often deny applications for new accounts from people with checkered banking histories. It’s impossible to hide a poor banking record when applying for a new account. In fact, every negative thing in your account history has been reported using something called the ChexSystems Network.

A person with a closed bank account in their history instantly sets off a red flag during the application process. The reality is that if you have an account closed due to unpaid overdraft fees, you may not be able to obtain a traditional banking account from a reputable institution.

Related: How Automation Has Helped Me Reduce Debt and Save

Why They Are Worth the Effort

Some people might say that jumping through hoops just to open a bank account simply isn’t worth the effort. Those people might just decide to use prepaid debit cards or pay a cash checking service to cash their paychecks.

However, those options can both become quite pricey over time when you consider all of the fees that are attached. What’s more, people who rely on those service can’t enjoy the convenience of online banking or around-the-clock ATMs. Plus, more and more employers are moving to deposit-only paycheck methods. If you don’t have a checking account, you might have trouble getting paid. Beyond that, your bank account situation can impact your ability to apply for a loan or mortgage in the future.

With all these considerations in mind, it’s worth your while to tackle some extra paperwork in order to obtain a legitimate bank account.

How Long Will You Have to Stick With a Second-Chance Account?

The promising thing about second-chance accounts is that they are only meant to be transitional. Most people can actually look forward to upgrading to a traditional account after just six months of showing exemplary performance. This means you will have to avoid creating a negative balance or accruing fees for at least six months if you want to take the fast track to a traditional bank account.

Things to Keep in Mind

Second-chance checking accounts should never come with predatory fees or practices. When in doubt, compare the second-chance account’s fees and restrictions to those of a traditional bank account. If they’re significantly higher or more restrictive, you may want to look elsewhere.

However, you may have to deal with some restrictions as you go through the process of applying for and opening an account.

Banks are all over the place when it comes to what they are willing to offer to customers. The reality is that you really are at the mercy of a bank when you ask for a second-chance account.

Some institutions will charge you a monthly fee for the privilege of having a second-chance account. Many institutions don’t give out free debit cards or checks to holders of these accounts. You may also have to deal with daily or monthly maximums on your transactions.

But it is possible to find banks that don’t require any fees. Some banks even offer access to debit cards, online payment options, and checks right off the bat.

The bottom line is that banks want to make sure you can demonstrate the ability to be responsible with your account. They will do this by imposing restrictions on you. They’ll safeguard their own interest by attaching fees to deter you from making poor choices with your account. In fact, you may even be required to participate in a personal finance class in order to open the account!

Where Can You Obtain One?

Only a handful of major banks and financial institutions offer second-chance accounts.

The good news is that most community banks and credit unions do. The best place to start is your local bank or credit union. You may get the best service if you’re able to connect with a credit union that is associated with your employment field.

Resource: Bank on the Advantages of Credit Unions

The Big Thing to Remember

While it can be unpleasant to have to jump through some hoops to please a bank, obtaining a second-chance account is definitely worth the effort. This type of account can help you to restore your financial integrity and set you on the path towards building up your credit.

If you’ve gotten into some bad banking habits, chances are you’ve also gotten into bad credit habits. Creating a better banking record will allow you to access products like secured credit cards that can help you rebuild your credit.

Financial institutions don’t often offer anything as forgiving as a second-chance account. So if you need this option and it’s available to you, you should definitely take advantage. Just be sure you check out the institution’s reputation, and look for predatory account practices before you sign up for this account.

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