Second Chance Checking Accounts

Second chance checking accounts simply are bank accounts that cater to people who have trouble opening regular checking accounts. The reasons why those people are denied a checking account can vary, but most of the time, it's because something has happened in the past that has caused them to be reported to a consumer checking registry such as Chexsystems or Telecheck. These are the two main services that financial institutions use in order to decide who they want to open bank accounts for and who they don't.

Financial institutions are notoriously risk-adverse. This is why an estimated 80 to 85 percent of banks subscribe to Chexsystems' database. This database keeps a record of various transgressions such as abusing the overdraft of your checking account, abusing your debit card, repeatedly writing bad checks, or writing fraudulent checks. Of course, in order for your information to be on that database, it has to be reported by a bank. Getting your name on that database can seriously complicate your financial life.

Being Reported To Chexsystems

The very first thing you'll realize upon getting reported to chexsystems is that it becomes very hard to open a new checking account. Most of the big banks will simply turn you down. As previously pointed out, an estimated 80 to 85 percent of the banks use Chexsystems in deciding whether or not to open new accounts. The result is that people who are on Chexsystems' database find it very hard to conduct basic financial transactions: once your name appears on the database, it stays there for five years, and it's very hard to get removed.

This is why second chance checking accounts exist. As their name suggests, those accounts are here to basically give a second chance to those people who have a less than perfect record with their bank accounts. So even if you've made a few mistakes in the past, you can still be offered the chance to manage your finances in a "normal" way.

Non-Chexsystems Checking Accounts

Almost all second chance checking accounts come with some kind of restrictions on various account activities as well as the transactions that can be performed. The reasoning (from the banks' standpoint) is that the more straightforward your account is, the less risk it represents for them. Remember, financial institutions are all about minimizing their risks.

However, although you have some limitations and have to face some fees, most of the  features of normal checking accounts (except for overdrafts) are included: ATM withdrawals, online banking and bill payments, and direct deposits.

ChexSystems has often been criticized for the way their database is maintained. First of all, it only lists negative information. Secondly, they're not exactly customer-friendly. Thirdly, they don't assess the level of risk that a consumer carries, all that matters is that your name is there and then banks refuse to do business with you.

Banks That Don't Use Chexsystems

Fortunately, not every bank uses Chexsystems' information in the same way. Each financial institution sets its own parameters and criteria for defaulting customers. So some of these banks have come up with various products aimed at customers who can't get regular bank accounts.

The eligibility criteria to open a second chance checking account differ from bank to bank, and they're constantly changing. The best advice we can offer is to shop around until you find the deal that makes sense considering your personal situation. For example, some banks may require hefty opening deposits; others may require only minimal amounts; just check the fine print, because it tends to balance out: what one bank gives you as an advantage, it usually has to compensate for by taking away something else.

A lot of banks have now adopted less strict guidelines when it comes to opening second chance checking accounts. This is due to the realization that most customers have problems with their checking accounts due to lack of knowledge. Sometimes one small miscalculation is what sets off a whole chain of events that looks way worse than it really is.

The biggest thing that can work against you when trying to open a second chance checking account is if you've been involved in fraud. In this case, you need another kind of help that is beyond the scope of this website.

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