October 20, 2017 in Banking
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Do you have a history of writing bad checks? Have you had a checking account forcibly closed in the past? In either case, you could face problems opening a new checking account.

Second-chance checking accounts could be just the trick to help you escape your troubled banking history. These special checking account products are ideal for people considered to be risky clients by traditional banking standards.

Banks check on your banking history

When you apply to open a bank account, the bank runs your information through a national reporting agency. ChexSystems is one of the most common agencies used by major banks and credit unions. A ChexSystems report is similar to a credit history, but for bank accounts.

If you mishandled a bank account in the past, it shows up on your ChexSystems report. Financial institutions and businesses both have the ability to report info to ChexSystems. Common remarks on a bad ChexSystems report include:

  • Fraudulent activity (check kiting or forging checks).
  • Repeatedly writing bad checks.
  • Allowing an overdrawn checking account to charge off.

Information stays on your ChexSystems report for five years. If banking info in your ChexSystems report is inaccurate, you can dispute the information.

If you have a charged-off checking account on your ChexSystems record, you can pay off the account. However, the account does not disappear from your record once you pay it off. Instead, the status changes to “paid in full” or “paid as agreed.”

Second-chance checking beats payday lender

Second-chance checking accounts provide an important financial service for those denied for conventional checking accounts. Those who do not have checking accounts find it difficult or costly to cash checks, pay bills and use other financial services. Without second-chance checking products, these individuals may have to use expensive check-cashing services or payday lenders to meet their financial needs.


Know what to ask before opening account

Many major banks and local credit unions offer second-chance checking to people with blemished banking histories. Not all second-chance checking accounts are alike, however. When shopping for an account, ask about the following:

  • Monthly fees.
  • Direct deposit requirements.
  • Minimum balance requirements.
  • Restrictions on account usage.
  • Required financial education courses.
  • Overdraft fees.

Thoroughly read the terms and conditions of the account so you know what to expect. For example, some second-chance accounts may not permit account holders to have a debit card. Instead, they may get only an ATM card for the account.wan

Certain financial institutions may waive account fees if you set up direct deposit or maintain a specific balance. Others may offer perks for signing up for features such as online banking and e-statements.

You may have to take a personal finance course to open a second-chance account. These courses help you learn how to manage your finances and handle a bank account so that you get the most from your new checking account.

Once you establish a period of responsible account usage, some banks and credit unions will convert your second chance account to a regular checking account.

Make a second-chance account work for you

To get the most from your second-chance checking account, start by always keeping track of how much you have in the account. Use a check register or a spreadsheet to record your transactions. When you make a purchase or write a check, immediately deduct it from your balance so you always know exactly how much you have in the account.


Record deposits as they are made, but ask your bank when the deposited funds will be available. Availability differs based on the type of deposit, when the deposit is made, and how the deposit is made. You don’t want to spend the money until it is credited to your account. Doing so establishes responsible account usage and prevents costly overdraft fees from accruing.

Is it time to check out second-chance checking?

If you are unable to open a regular checking account, it is time to explore second-chance checking accounts. Second-chance checking accounts offer customers the opportunity they need to prove they can use a bank account responsibly. Do your research to find an account with affordable fees and customer-friendly terms.

Use Bankrate’s home budget calculator to help you keep track of your spending.