With flawed banking history, new account application is more likely to be rejected.
Offenses such as depositing fraudulent checks and unpaid overdraft fees can raise a red flag and put you on reporting agencies database -- this increases the likelihood of rejection.
But there are some banks and credits unions that are willing to overlook your financial woes and give you a shot at rebuilding your banking histories. Such banks offer a program like "second chance checking" -- this comes under various names, but the concept is the same.
Second chance checking is a checking account that gives people another shot at traditional banking. While second chance checking account doesn’t have all the benefits of a standard checking account, it's a good start to rebuilding flawed banking histories.
Most Credit unions offer higher interest rate than traditional banking. If you open a "second chance checking account" with a credit union, you’re more likely to get lower fees, service charge, higher interest rate, and better customer support.
How does second chance checking work?
When people are denied access to banking, they turn to alternatives like prepaid debit cards or check-cashing services for deposit or to receive banking services. The downside to this option is that you’re more likely to pay a higher transaction fee. These alternatives also lack some of the features of traditional banking such as Internet banking and overdraft etc.
The more suitable option is second chance checking account. With a second chance checking account, you generally need a low minimum balance, and it's easy to manage for people not used to banking. Most second chance checking accounts come with monthly fees that can't be waived or other requirements such as enrolling in money management class. You won't be allowed to overdraft your account until you meet a certain requirement or cleared of bad credit records.
Like many other credit products – with high risk comes higher fees, fewer options, and freedoms. When your options shrink, prices go up, and service charge skyrocketed.
Why you should consider second chance checking
A second chance checking account allows you to deposit checks and pay bills online. It's more convenient and flexible than many other alternatives. Most banks will let you upgrade to a regular checking account if you manage the account responsibly within six months.
Most importantly, the financial education component of second chance checking and relatively low fee, makes it ideal for people looking to rebuild their credit history.
What if you're denied second chance checking account?
A negative reporting agency report and poor credit rating can frustrate your efforts to open a checking account in general.
Customers who filed for bankruptcy in previous months or those with a history of fraudulent transactions could find it difficult to open checking account.
In this case, a prepaid card is a good option. Prepaid card industry continues to diversify, and many card companies now offer alternatives to customers who can't meet the requirement of traditional banking or consumers who don't want a traditional checking account.
Prepaid cards aren't linked to traditional bank accounts, and most prepaid card issuers won't prioritize your banking histories unless you’re flagged for serious financial wrongdoing.
If you have histories of overdrawing your checking account, a prepaid card can be a well-suited option.
With many varieties of prepaid card on the market, choosing the right one can prove difficult. To be on the safe side, you should ask questions like -- what's the service charge per transaction? Is there a monthly maintenance fee? Make sure you find out this information before applying--because things like hidden service charges can eat into your account balance.
Where to find second chance banking
Some major banks and most community banks and credit unions are offerings second chance checking albeit under various names like Fresh Start Checking and Opportunity Checking. We have compiled a list of banks and organizations that offer second chance checking. Check the list below for details.
In conclusion, second chance checking is a great way to get back into the banking system, don't squander the opportunity otherwise it may have a long-term repercussion. If you handle it responsibly, most banks will let upgrade to a standard checking account to help rebuild your credit history.