Need a second-chance checking account? Here’s everything you need to know

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If you have a messy banking history, expect the cold shoulder when you try to open a new checking account.

Many consumers don’t realize that their banking habits are monitored and reported to a federally authorized agency that banks use when consumers apply to open an account. The good news is that there are some banks that offer “second-chance” checking accounts to people with troubled banking profiles. These special accounts have more restrictions — often in the form of fees that can’t be waived — but they give consumers a chance to stay in the banking system and prove they can manage their accounts responsibly.

Pros of second-chance checking accounts

A second-chance checking account has several benefits for people who can’t qualify for a regular bank account. Instead of paying fees to a check-cashing store to cash physical paychecks, for example, or buy money orders to cover their bills, high-risk consumers get access to most of the conveniences of a checking account.

Second-chance bank accounts let customers deposit and withdraw money, write checks, and use debit cards and ATMs.  If the customer handles the account responsibly for a certain time, usually six months to a year, the bank may let the customer have a free or less restricted checking account. That may happen automatically or you may need to put in a request with the bank after you’ve demonstrated greater responsibility for a period of time.

Another benefit of using a second-chance bank account at a federally insured bank or credit union is that it’s much safer than dealing in cash.

Cons of second-chance checking accounts

Second-chance checking account customers should not expect to get all the services of a regular checking account. Monthly account fees may be mandatory. Limits on debit card spending may be imposed. Overdraft protection might not be offered either.

Certain digital banking services may also not be available to second-chance checking customers. For instance, Wells Fargo’s Opportunity Checking account doesn’t allow person-to-person payments.

Second-chance bank account customers may have requirements, such as setting up direct deposit or taking a brief course in money management, before you can open an account.

How to pick a second-chance checking account

It may seem bleak for people who are turned down for a traditional checking account. But there are options for consumers who are unable to get a regular checking account. Look for an account with the lowest fees, low or no minimum balance requirements and access to online and mobile banking.

Banks and credit unions will differ in their account offerings. Try to find the features and services that are most important to your daily financial life. Then, use the account responsibly so that you can graduate to a regular checking account.

Second-chance checking accounts

The table below shares some information about a few banks and credit unions that offer second-chance checking accounts. You can visit their websites for more details.

Financial institution / Name of account

Monthly maintenance fee

Minimum deposit to open

Radius Bank/Essential Checking $9 $10
Chime/Second Chance Banking $0 $0
BBVA/Easy Checking $13.95 $25
Wells Fargo/Opportunity Checking $10 (fee can be waived with certain transactions) $25
InTouch Credit Union (serving Michigan, Nevada and Texas)/Fresh Start Checking $14.95 $50

Why was your checking account application denied?

If you applied for a bank account and were denied, chances are the bank used a consumer reporting agency called ChexSystems to review your banking history and saw a blemish on your report, such as a bounced check or providing false information to the bank. ChexSystems issues a consumer score, which banks use to gauge your risk level.

Many bank account applicants don’t realize that details of their banking history are reported to ChexSystems, an agency that is governed by the federal Fair Credit Reporting Act. ChexSystems clients report information on closed checking and savings accounts and that information stays on record for five years.

You can request to see your ChexSystems report for free, and you can dispute inaccurate information in the report. Viewing your ChexSystems report can help you understand why a bank turned you down for a checking or savings account.

Featured image by Reza Estakhrian of Getty Images.