Tiffany Raiford
If you have never heard of second chance bank accounts, consider yourself very fortunate. As the wife of a banker, I hear it all, including the fact that some customers are not permitted to open a bank account with many banks. Why? It all depends on your past banking history. Are you the kind of banking customer that does not pay overdraft fees or keep your account in good standing? Second chance bank accounts are bank accounts that are specially created by some financial institutions for people just like you.
If you have had instances in the past in which you were unable to pay overdraft fees, if you wrote a number of bad checks or if you are left owing a bank money and never making another deposit, you might not be permitted to open a new checking account with another bank. What happens with the bank after you owe them money is that they no longer want you to bank with them, and the bank will put you on black list of sorts. This is going to tell other banks that you are not a very reliable customer and that you are quite risky. Those banks might choose not to allow you to open an account with them as a result.
That’s where second chance bank accounts come into play. These are accounts offered by some, not all, financial institutions designed to help you get a ‘second chance’ at banking. The premise, as described by the banks that do offer second chance bank accounts, is that they want you to rebuild your credit and become a better banking customer. What this means is that they are going to help you out by offering you a bank account when no other bank will offer you the same. This means that you are going to get a second chance.
If you are someone with bad credit, someone with a poor banking history or someone that is really looking hard to open a bank account with no avail, a second chance bank account might sound like the answer to all your banking needs, but is it?
Truthfully, you should learn a bit more about second chance bank accounts before you open one. We are not fans of judging a book by its cover, so we highly recommend you get to know second chance bank accounts before you determine whether or not this is the bank account for you. You might be surprised just what you learn.
Were You Rejected for a Bank Account?
Before we discuss the second chance bank accounts and whether or not they are worth it to open, we want to first make sure you understand why you were rejected for a new bank account in the first place. For one, you have a negative banking history, but how?
Nearly 80% of all banks in the U.S. use a system called ChexSystems. Essentially, this is like a credit bureau for bank accounts. Financial institutions use this system to see whether or not you have a habit of bouncing checks, whether or not you have any outstanding balances you might owe a bank or if you make it a habit to pay overdraft fees to banks because you cannot keep your finances in check. These things can stay on this report for as long as five years, so you might want to check with the company by writing to them in person to ask for a copy of your report if you’re unsure why you are being denied for a new bank account.
The Downside of Second Chance Bank Accounts
Nothing is offered free of charge to those with less than stellar credit. Just like someone with bad credit might not be able to afford to pay for a mortgage because they are not able to get one with a decent interest rate, many people are not able to pay for their second chance bank accounts because the fees are so hefty. We cannot give you a definite amount as to how much it’s going to cost you to open a second chance bank account; it all depends on the bank you go with, where you live and what terms are offered in that financial institution’s second chance bank accounts.
What we can tell you, however, is that these second chance bank accounts often come with a variety of issues, such as the fact that you are now going to pay a lot of fees you might not otherwise pay with a traditional bank account.
- Monthly fees
- Withdrawal fees
- Deposit fees
- Hefty overdraft fees
- Hefty penalty fees
- ATM fees
All these fees typically come with some bank accounts, but these fees with a second chance bank account are going to be significantly higher because this is a bank looking to ‘help’ you by first helping themselves to your funds. You might even have account limits, be charged a fee for dropping your balance below a certain dollar amount and so much more depending on where you go for a second chance bank account.
Additionally, many of the banks that offer second chance bank accounts require that their customers and account holders do more than just keep money in the bank. Many require that their account holders attend financial literacy courses. Some are required to attend money management classes if they want to open an account.
Some second chance bank accounts do not offer overdraft protection to their clients, which is often something that comes in the form of a waived fee if you transfer or deposit the funds to cover an overdraft in the same business day. It makes sense, though, since this type of bank account is designed to prevent you from making any overdrafts; you already have bad credit and a poor banking history, so banks are banking (haha) on the fact that you won’t make the same mistakes again.
Is a Second Chance Bank Account Right for You?
This is not a question I can answer for you. I don’t know your personal financial situation. I don’t know if you are someone who made a few mistakes when the economy was poor or if you are a habitual user and abuser of the banking industry; I don’t know what you can afford or if you can even afford to pay the fees associated with second chance banking. What I do know is that you have to consider this if you want to open a bank account with bad credit or a sketchy financial history with bank accounts.
If you are unsure, you can do something to figure out if a second chance bank account is right for you. Consider how you are banking right now. Most people without a bank account are forced to use check cashing services to obtain cash from their paychecks. When you have to send in your bill payments, you probably spend time getting money orders from a local post office or store, and that is another fee. What you are paying right now is a number of fees that are associated with each of the things that you are doing. What this means is that you are working very hard to pay fees for your money rather than working very hard to enjoy your money.
Are the check cashing and money order fees you pay now more than the fees associated with the second chance bank account that you are considering? We cannot tell you, since you need to find a local financial institution willing to offer you a second chance bank account, first. Now that you have a bank in mind, find out what their fees are and do a cost comparison.
Remember, though, that once you pay the fees associated with your second chance bank accounts, you get to eventually have a regular bank account. Usually after a year or two of good standing with a second chance bank account, you are able to then receive an upgrade to a regular checking account. This is important to keep in mind when making the decision.
The fees might seem like a lot with a second chance bank account, but you will get to redeem yourself and eventually have a real bank account once again, and that is often a priceless bonus.
Photo by Getty Images
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