4 Ways Second-Chance Banking Can Give You a Fresh Start

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  • Banks and credit unions routinely deny customer applications.
  • Second-chance banking offers customers a way to start over and rebuild their banking reputations.

There's no reason to live without a bank account.

If you've ever been denied a checking account, you're probably well aware of ChexSystems. ChexSystems is like a credit report for banks. Once you apply for an account, most banks and credit unions run your identity through ChexSystems. If you have negative bank activities on your report -- such as unpaid negative balances -- it shows up on ChexSystems. Even if you've been a victim of fraud and done nothing wrong, it's possible for the mess created by the crook to show up under your name on ChexSystems. In either case, a bank or credit union may deny you a new account.

That's where second-chance banking comes in. With second-chance banking, you have the opportunity to rebuild your banking reputation

A fresh start

When you apply for a second-chance checking account, the bank or credit union either opt not to run your name through ChexSystems, or the financial institution is willing to give you a fresh start with a new checking account -- no matter what's happened in the past.

Not all banks or credit unions offer second-chance banking, but those that do understand two things:

  1. You may be at greater risk of overdrafts than the average customer.
  2. You deserve the opportunity to start over.

Finding the right bank or credit union

Because a bank is taking a greater risk with a new customer who has had a negative banking experience in the past, some banks and credit unions charge monthly fees. Some charge no monthly fee. Some offer direct deposit and overdraft protection, while others do not. The point is this: It's important to shop around for a second-chance bank. The fact that you've had negative experiences in the past is no reason to feel as though you don't deserve the best banking experience possible today. The more effort you put into finding the right financial institution for you, the happier you will be.

Fortunately, you have many options. In addition to banks and credit unions near you, some online banks also offer second-chance banking. And if you're squeamish about banking online, there's no need to worry. Online banks have the same FDIC protection as brick-and-mortar banks. As you shop, double-check whether an institution is covered by FDIC (banks) or by NCUA (credit unions).

How it works

Once you've found a bank offering the features you need for free or at a low cost, you're back in business. It's possible you'll have a lower spending limit than before, at least until the bank knows you're on the right path.

According to ChexSystems, it takes up to five years for negative remarks to fall off your report, but that's okay. As you go about your new banking business, you build a positive history with ChexSystems. Think of it as repainting a room. The longer you work at it, the better it looks.

Here are four ways second-chance banking can enhance your life:

1. It makes bill paying easier

Once you have another bank account, there's no reason to waste money on a prepaid debit card or money orders to pay bills. You can sit down and write out a check or set up auto-pay.

2. It helps rebuild your banking reputation

The same people who look at your ChexSystems report and see that you've had trouble in the past will be able to see that you're successfully working with a new bank. The more time that passes, the more confident any financial institution is going to be about your ability to handle an account.

3. It acts as a learning tool

One thing most of us don't learn as kids is how to handle a bank account. We don't learn about overdraft fees, the value of overdraft protection, how to balance a checkbook, or how to manage money responsibly. Even if we take a personal finance or home economics class or two in high school, we learn only the bare minimum about banking.

Now that you've had trouble with a bank account, you're likely to be more aware of how your new bank operates and what's expected of you. One thing about financial institutions that offer second-chance banking is that they want to see you succeed. If you're ever unsure about something, contact the bank and they'll walk you through. When you're successful, they're successful.

4. It allows you to avoid the alternatives

Having a bank account means not having to walk around with cash in your pocket. It means not having to run to buy a money order any time a bill comes due. As long as you're responsible with your account, it means not having to pay unnecessary fees.

How to find a second-chance bank account

Once you've checked with local banks and credit unions (a simple phone call will do), consider online banks. One of our favorites for second-chance banking is Chime. Chime charges no monthly fee, requires no minimum deposit, and is available nationwide.

OneUnited Bank's second-chance banking is called U2. There's a $12 monthly fee and $50 deposit required to open an account, but there's no minimum balance requirement.

Capital One 360 checking is not officially a second-chance account. However, Capital One 360 does not use ChexSystems to screen applicants so you don't have that hurdle to jump. There's no minimum deposit required to open an account, no monthly fee, and Capital One ATMs are scattered across the country.

Another financial institution that does not use ChexSystems is Navy Federal Credit Union. Designed for active-duty and retired members of the military and their families, Navy Federal gives customers access to four free accounts, charges no monthly service fee, requires no minimum balance, and rebates ATM fees up to $20 per statement.

If you've had banking problems in the past, it's time to let them go. Second-chance banking is all about looking forward.

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