What Banks Offer Second Chance Accounts?

If you’ve had a few bumps in your banking history, like accounts closed due to unpaid overdraft fees or bounced checks, you’ve likely run into roadblocks opening a traditional checking account. But without a checking account, you may be missing out on features and services to help you manage your day-to-day finances.

It may be time to see if you qualify for a second chance checking account. A second chance checking account, also referred to as a fresh start account, is designed to help you access certain benefits of a bank while you rebuild your financial foundation. 

Even though second chance accounts can get your banking back on track, there are limitations to consider. So, what are the benefits of a second chance checking account, and what banks offer second chance accounts?

The Focus Federal Credit Union is here to help you learn more and make the choice that’s right for you.

What Is a Second Chance Account?

When you apply for a checking account, the financial institution will check your banking history with ChexSystems. ChexSystems is a consumer reporting agency that houses information on mishandled checking and savings accounts and includes five years of data. The vast majority of banks and credit unions participate in the ChexSystems program because it provides information to determine the risk of approving an account.

ChexSystems will indicate negative banking incidents, such as a history of writing bad checks, involuntary account closures, or too many overdrafts. A poor score can classify you as too much of a financial risk and prevent you from opening a checking account. With a low ChexSystems score, you may not qualify for a traditional checking account.

If you’ve had an adverse account history and won’t qualify for a traditional checking account, certain banks and credit unions offer second chance checking accounts. These accounts provide an alternative to a conventional checking account. Banks and credit unions offering second chance checking accounts are willing to overlook past mistakes and help customers access the basic features needed to manage their money. For second chance bank accounts, banks and credit unions choose not to check ChexSystems or are willing to forgive a negative report.

Benefits of Second Chance Accounts

Suppose you’re unable to open a traditional bank account. In that case, a second chance account allows you to use the features and services of a conventional checking account. Accounts are protected by the FDIC, which is safer than dealing in cash that can be lost or stolen. These accounts allow you to demonstrate you’ve turned over a new leaf and are getting your finances in order. 

With a second chance checking account, you can: 

• Access Standard Banking Services. You can access standard banking services like online bill pay, direct and mobile deposits, and link a debit card to your checking account.
• Avoid the Alternatives. Second chance checking accounts allow you to avoid alternatives, such as prepaid debit cards or check-cashing services, which come with costly transaction fees and balance requirements.
• Rebuild Your Bank History. If you open a second chance bank account and use it responsibly, you can raise your ChexSystems score. And, after demonstrating responsible use of the account, the financial institution will transition you to a regular checking account. Note: ChexSystems marks stay on your consumer report for five years. Second chance bank accounts do not help improve your credit score.

Limitations of Second Chance Accounts

Banks and credit unions offering second chance checking accounts understand account holders present a higher risk, and they need to offset risk by limiting options on the account. Second chance checking accounts usually have monthly fees and restrictions that can’t be waived. They carry more requirements than standard checking accounts, and you may be limited or restricted in what you can do.

With a second chance account, you may have a limited number of transactions and restrictions on your ability to write checks, send money electronically, or spend on your debit card each day. And you typically can’t enroll in an overdraft program. After all, one primary reason for opening an account is to prove you can avoid overdrawing. 

You also may be required to set up direct deposit, maintain a minimum balance, or complete money management classes. Read the fine print to ensure you’re aware of any extra fees or requirements.

What To Look for in a Second Chance Account

Despite their limitations, second chance checking accounts often beat alternatives, such as prepaid debit cards or check-cashing services, which can come with costly transaction fees and balance requirements, and may lack convenient features.

But before applying for a second chance account, you’ll want to understand:

• Fee Structure. Second chance accounts often come with add-ons like maintenance fees. Certain institutions waive these fees if you set up direct deposit or maintain a minimum account balance. Second chance accounts usually prohibit overdrafts or charge high overdraft fees.
• Account Requirements. Certain financial institutions require you to have a savings account with them for a few months before opening a second chance checking account. When opening a second chance account, they may require a minimum opening deposit and mandate you to attend financial management classes.  
• ATM Access. Check for convenient fee-free ATM locations. Regional credit unions are often part of the CO-OP Shared Branching. This allows members to access more than 30,000 ATMs surcharge-free nationwide. 
• Access to Technology. Investigate the app and online accounts options the financial institution provides. Look for features such as mobile deposit, online bill pay, budgeting tools, and automatic savings programs. 

What Banks Offer Second Chance Accounts?

Second chance checking accounts can be found at brick-and-mortar banks, online banks, and credit unions. Although these accounts may not include all the services and features a typical bank or credit union offers, they provide many of the necessary services of traditional accounts and allow you to rebuild your banking history and raise your ChexSystems score.

National banks and financial companies offer second chance checking nationwide. If you prefer a more personal experience, check out a community or regional bank or credit union. 

Why a Credit Union Might Be a Better Option

An option to consider for a second chance checking account is a credit union. A credit union is an excellent choice if you want a personal, community-focused way to manage your money.

Credit unions differ from banks in their structure. Banks are for-profit entities run by shareholders. Banks can be national or regional, but their primary goal is to maximize profits.

Credit unions, on the other hand, are run by their members, who have voting rights, allowing them to weigh in on decisions. Profits generated by the credit union are returned to members through lower fees, better interest rates, and enhanced services. Their member-centric approach ensures your financial needs are prioritized.

Credit unions are known for their customer service and going above and beyond to support members on their financial journeys. They try to understand each member’s financial goals and do what is possible to meet them. The highly personal approach means members get financial advice and solutions tailored to their circumstances. 

Tips for Making the Most of Your Second Chance

Once you have a second chance checking account, you’ll want to stay on track to improve your financial health. In the digital age, there are lots of tools to make staying abreast of your finances easier, but they require proactive effort.

To make the most of your account, you’ll want to:

• Monitor Your Accounts. A lot can happen in your bank account daily. Your balance moves up and down, deposits roll in, payments are due, or suspicious activity is flagged. Regularly check in on your account.
• Set Up Alerts. Account alerts are one of the easiest ways to protect your money and stay on top of your finances. Notifications can be sent by text, email, or through your bank’s app, providing convenience and protection. Alerts can notify you of a low balance, overdraft fees, unusual activity, and deposits. They will help you keep a better track of the money going in and out of your account.
• Keep Apps Updated. Install any updates for your banking apps. Updates often minimize security vulnerabilities, while using outdated software leaves you exposed.

Start Rebuilding With The Focus Federal Credit Union

A checking account is an essential part of daily money management, but if you have struggled to manage bank accounts responsibly, a second chance account can offer you another shot at banking. 

To learn more about a TFFCU Fresh Start Account, contact us today. You’re not alone on this journey; we’re here to help you get to a place of financial security. With a TFFCU Fresh Start account, you benefit from no minimum balance, affordable monthly fees, an opportunity to upgrade to a regular account, access to online banking and financial tools, and judgment-free local service. 

Aiden Ferguson

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