What Is a Second-Chance Checking Account?

A second-chance checking account can help you repair a bad banking history.

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Just like creditors maintain and check your credit score and credit history, banks examine your banking profile when you apply for an account. If you are denied a checking account due to issues with your banking profile, you can still access banking services with a second-chance checking account. These accounts give people an opportunity to repair less-than-stellar banking histories, and some banks eventually upgrade you to a more traditional account once you find your groove. 

What is a second-chance checking account?

A second-chance account functions like a traditional checking account but often comes with mandatory fees, more restrictions and fewer features. However, they offer an opportunity to those who have struggled with conventional checking accounts to have another go. You can maintain access to funds in a safe account, including debit card access and online bill pay.

If you manage your account responsibly for six to 12 months, your bank may transition you to a more standard checking account with fewer fees and more features. If the bank doesn't offer this upgrade automatically, you may need to put in a request.

Pros and cons of a second-chance checking account

Pros of a second-chance checking account

  • Accessibility: Individuals with high-risk banking histories have access to second-chance checking accounts and some of the conveniences that come with a standard checking account, like depositing cash, debit card use and ATM access.
  • Lower minimum requirements: Second-chance checking accounts typically require lower minimum balances, giving you more flexibility with your cash.
  • Overdraft protection: Most second-chance checking accounts come with overdraft protection, so you can avoid paying overdraft fees and penalties. 
  • FDIC-insured: If your banking institution is covered by the Federal Deposit Insurance Corporation, the money in your account is insured up to $250,000.
  • Responsible use can lead to an upgrade: If you manage your account responsibly for six to 12 months, your bank may upgrade you to a less restrictive checking account.

Cons of a second-chance checking account

  • Higher fees: Second-chance checking accounts typically come with more fees than regular accounts, such as monthly maintenance charges, account setup fees, overdraft fees, foreign transaction fees and more.
  • Fewer benefits: Some second-chance checking accounts don't allow check writing, among other standard checking account privileges. 
  • May require an initial minimum balance or direct deposit: Banks that offer these accounts typically don't use reports from ChexSystems or credit reports to determine eligibility. However, they may require an initial minimum balance or a direct deposit to waive the monthly service fee.

Who's eligible for a second-chance checking account?

Second-chance checking accounts are offered to people who have a flawed banking history and are less likely to be approved for a new account due to information found in ChexSystems. When you apply for a traditional checking account, banks and credit unions may pull your banking history using a consumer reporting agency called ChexSystems. ChexSystems issues a consumer score banks use to gauge risk, similar to a credit card lender pulling a consumer credit score

You may not qualify for a standard checking account if you have a history of overdrafts, unpaid fees or forced account closures. But second-chance checking accounts may help individuals rebuild their banking history while they wait for negative records to fall off their report, which can take up to five years.

Where can I find a second-chance checking account?

Many banks and credit unions offer second-chance checking accounts. Local banks and credit unions might also offer some options.

How do I apply for a second-chance checking account?

To open a second-chance checking account, you'll need to visit a bank branch and speak with a representative or you can use an online application. Either way, you'll indicate that you had a checking account closed in the past. A representative may ask questions about the account's closure and your current banking situation. 

Gather the following information in advance to help your application process move more quickly. 

  • Your name, address, phone number and email
  • Social Security number
  • Employment information
  • Personal and financial references 

Once you've provided this information and the bank reviews your application, it may contact ChexSystems for details about your banking history. However, some financial institutions are willing to overlook an adverse checking history. 

Alternatives to second-chance checking accounts

Aside from a second-chance checking account, other options you could consider include:

  • Secured credit cards: Unsecured credit cards are the standard variety of credit cards, but secured credit cards are a good option for people with bad or no credit. A secured credit card requires the user to put down a deposit equal to the credit limit. You can then use the card to make purchases and pay monthly bills. The credit card reports your activity to the three major credit reporting bureaus and can help you rebuild your credit.
  • Prepaid debit cards: Prepaid debit cards are similar to credit cards used to make purchases. But unlike credit cards, there is no credit history or card balance. Users load money onto their cards and then spend that money. Once it's gone, it's gone until they reload it.

The bottom line

Second-chance checking accounts can provide a pathway for those with a limited or poor banking history to get back on track, offering many of the same features of a basic checking account. If you've previously had trouble with a checking account, a second-chance checking account may be your opportunity to rectify the situation.