Best Second Chance Checking Accounts of 2022

Katie StinerMay 1, 2022

If you’re denied a standard bank account due to a negative banking history, banks will usually relax their standards for a second chance checking account. Some financial institutions charge various fees on these accounts, and it is important to weigh the options carefully. To help you with this process, we’ve evaluated the best checking accounts on fees, minimums, APY, customer service, digital experience, and overall quality.

Who needs a second chance checking account?

Past financial mistakes and credit reporting bureaus tend to cause issues for people after they have overextended or made late payments. Getting another line of credit or loan becomes more complicated, with more conditions, red tape, and significantly more expensive.

Similarly, banks have shared access to this type of information from a database of checking accounts through a company called ChexSystems. This company stores information about negative reports on users in their databases for up to five years. A bounced check from four years ago will still be on your checking account record.

People who have had financial difficulties in the past and have made financial mistakes on their record should consider second chance checking accounts to help them get back on their feet. These accounts can help people start fresh and build a new record of financial responsibility and positive banking history, usually at the expense of higher fees and restrictions.

Why you should apply for a second chance checking account?

Even if you managed to get financially stable without using banks, there are benefits to re-entering the banking world. Some of those benefits include:

• Access to digital payment methods to make electronic deposits or withdrawals.
• During natural disasters, people who do not have their money in bank accounts run a high risk of it being destroyed, lost, or stolen. Checking accounts offer the safety of having your money stored digitally in an FDIC insured bank account, should anything happen in your area.
• Removing financial barriers to banking and helping unbanked people build their wealth.

If you are looking to rebuild your credit, a second chance account will not help you. It can only help rebuild your banking history, not your credit score. For that, you may want to look into a secured credit card.

While second chance checking accounts are not able to help rebuild your credit score, it will help boost your credit profile. Many lenders, if not all, will check to see if you have a checking account when applying for a loan for a new home, a new car, to start a business, or to take out a personal loan. Just having the account open will cause the lender to look upon you more favorably.

What to consider before opening a second chance checking account?

A common question that arises when considering this type of account is “are second chance checking accounts worth the hassle?” This is a good question to consider since the terms are less favorable than traditional checking accounts. A better question to ask would be “What am I missing out on by not having a bank account and is that worth more than the costs included with second chance accounts?” Having a bank account makes it easier to live in the modern world. It is becoming harder and harder to pay for big ticket items in cash, not to mention imported items. Even sending a check requires you to have an account for that payment to draw from.

Unlike traditional checking accounts, most second chance checking accounts typically have monthly fees that will not be waived, but it offers consumers a chance to get back on their financial feet. Here are a few factors to consider:

• It offers the convenience of being able to pay with a debit card versus carrying cash or a prepaid debit card which needs to be recharged anytime funds are low.
• The overall costs of opening this type of account are less costly than check-cashing services, saving the user money in the long run.
• Depending on the bank, within six months to a year, you may be able to switch to a standard checking account if you show good banking history.
• It provides a portal for you to monitor your account online or through your smartphone. Through this service, you can also set up alerts to help you manage your money.

While they do help people who are struggling to get back on their feet, there are downsides to this account. They have more and stricter requirements than normal checking accounts:

• Some banks require a direct deposit to be set up.
• Some banks require completion of a qualifying financial management class.
• Overdraft protection is usually not an option because most people who need this type of account are in this position more likely due to overdrafts in the first place. The bank will want you to demonstrate that you can avoid overdrawing.
• Depending on the bank, your second chance account may not come with check writing privileges or maybe heavily limited.

Common second chance checking account fees

Second chance checking accounts have a tendency to charge not only more fees, but also higher fees than the standard account. These fees are justified by the banks as a way to mitigate the risks of allowing someone with a poor banking history to hold an account with them.

Typical fees you may find include:

• Account setup fees
• Monthly account fees
• Foreign transaction fees
• Minimum balance fees
• Negative account balance fees

Maintain your new banking history

When you have chosen an account that is right for you, you will need to show that you can maintain being financially responsible. Showing a track record of responsible banking can open doors to new opportunities and products that your bank offers. Here are a few tips to help you out along the way:

• Pay all fees on time: Showing your bank that you are able to pay fees on time consistently will build a positive ChexSystems report.
• Only use your bank’s ATMs. This will help you avoid ATM fees which can add up over time.

How to choose the best second chance checking account

Here are some factors to look for when choosing a second chance bank account:

• No or minimal monthly fees: Some banks offer second chance checking accounts with higher monthly fees. If you are looking to save money, be on the lookout for banks that offer lower rates or no fees at all.
• No minimum balance fees: One of the terms for second chance accounts is having a minimum balance, so the bank can ensure you do not overdraft from your account. Some banks charge a fee whenever your minimum balance falls below the threshold. Be on the lookout for an account with low or no minimum balance fees.
• Online services such as bill paying: This will make your life way easier when scheduling payments and monitoring your account balances to make sure you are always in the green (and to avoid fees like minimum balance fees).
• Little to no limits on transaction amounts: Some banks have a limit of transactions you can make with a second chance account, but you can find banks that do not limit this feature.