Second Chance Checking 101

Checking & Savings Accounts, Investing & Retiring

Are you finding it difficult to open a new bank account due to a previous mismanaged account? Your bridges with your bank may not have burned down completely. Get back into your bank’s good graces with a second chance checking account.

Fresh Start, Second Chance Checking Account

According to an FDIC National Survey, as of 2015, 7% of U.S. households were unbanked, meaning that they do not have a traditional bank account. In some of these cases, bank accounts were closed due to mismanagement such as too many overdrafts, bounced checks, or fees that went unpaid.

When a bank shuts down your account for this type of reason, the information is usually forwarded to ChexSystems, a company that serves as a security clearinghouse for banks and credit unions. If you are flagged in ChexSystems as a high-risk account, it can be difficult to get a new bank account to prove that you have learned your lesson and rebuild your banking profile.

Second chance checking accounts exist for just this reason. They allow you to establish a new account and rehabilitate your banking profile. Since you are still considered high risk, second chance accounts usually have monthly fees and minimum balance requirements that traditional checking accounts do not. Account fees are often in the $10 to $15 range.

Most large national banks do not offer second chance accounts — the main exceptions are Wells Fargo and PNC — but there are many other banks that do. Credit unions are often good choices, as they usually offer lower fees and greater flexibility in account options. Google “second chance checking account” and see what’s available that meets your needs.

Just because you are getting a second chance account, does not mean that you cannot shop around for the best accounts. Perks like free online bill payments, online spending trackers, and 24/7 access are even more precious with a second chance account.

Depending on the bank, you may be able to convert a second chance account into a regular checking account after showing responsible use for a given period of time. Check the policies with individual banks to find out your future options.

If you are being denied a regular checking account, it’s important to assess realistically the reasons why. Were you a victim of identity theft and financial fraud? You will need to dispute erroneous charges or loans that have been taken out in your name before a bank will approve your account. Did you forget to pay fees? Typically, that happens through procrastination or poor routines. Did you simply not keep track of your spending relative to your account balance? You may need help establishing spending discipline and a routine to keep your spending in check.

If you are not sure why you are being denied a new checking account and have to go through the second chance path, ask the bank to elaborate. They should be able to provide you with an explanation.

In any case, you need to exhibit an extra level of fiscal discipline with a second chance account. Don’t be afraid to ask for assistance. Banks are likely to be more understanding if they see that you recognize your past mistakes/misfortunes and are taking steps to keep them from happening again.

The bottom line is to learn from your experience and set a proper plan to correct the underlying issue. Otherwise, you are likely to run into the same problems with your second chance account. Everyone deserves a second chance with banks, but you may never find a third chance checking account.

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