Bad credit can have detrimental effects on your fiscal life.
If you have a bad credit report, your attempts to open a new bank account might continually hit a brick wall.
According to the FDIC 2017 report, more than 8 million Americans (6.5% of the entire population) are “unbanked.” In other words, this population represents people with no banking relationship whatsoever.
At the same time, over 18% of the entire US population is considered “underbanked,” which means they have limited banking relationships, and so resolve to use payday loans, prepaid debit cards and check cashing businesses.
No doubt, this huge percentage of people in this category are in this situation because of bad credit that consequently makes banks reluctant to open checking accounts for them.
However, like any other fiscal challenge, having no checking account owing to poor credit has a solution.
There are ways to build solid relationships with banks using a “second-chance” bank account.
If you fall into this category, we’ve compiled a comprehensive set of information about what you need to know.
Overview: “second-chance” checking accounts
Second-chance checking accounts work differently from the standard checking account.
They give you a chance to start over again and use your checking account responsibly even if a bank closed one of your accounts in the past due to mismanagement.
Also known as “basic” accounts, they can help you get right on track if your credit score or history prevents you from opening a regular account.
This provision also works of you made a mistake of closing an account with outstanding balances or negative balances.
How “second-chance” checking accounts work
Generally, a second-chance checking account works like the standards checking account but with more restrictive processes.
Banks designed these accounts to strike a balance between helping users meet their fiscal requirements and reducing the risk of delinquency.
Typically, these accounts have the following features:
- No overdraft or overdraft transfers
- Low monthly fees
- Lower debt and withdrawal limits
- No provision for check writing
You’ll realize that a second-chance checking account has similar or slightly lower monthly maintenance fees than standard checking accounts, but the fees are unavoidable.
Often, you’ll be required to pay a lower fee at the end of every month, but the option to waive such fees is unavailable – as will be with a standard checking account.
Besides, other account fees may comply with the bank’s charge rules, but you need to read the fine print to see if there are notable disparities.
Second chance checking accounts also tend to prevent overdrafts or overdraft transfers. While this approach may seem like an effective way to prevent you from exceeding your ability to repay, it might not save you in an emergency.
At the same time, second chance accounts impose daily limits on the amount you can spend from your debit card.
Additionally, a common limitation that second-chance account holders experience is the inability to write checks. Since checks are often a source of trouble for people who tend to lose track of how many times they’ve written relative to their balance, this hindrance is an effective way to preventing overdrafts and canceled check payments.
Pros and cons of second chance checking accounts
Despite the monthly fees, charges that can’t be waived, and general requirements than standard checking accounts, second chance checking accounts offer notable alternatives that can be an excellent way to start over again with bad credit.
From helping you improve your banking history to rebuilding your credit, prepaid debit cards, and check-cashing services, these alternatives are undoubtedly helpful in improving credit.
These benefits can have accompanying high transaction fees and also lack convenient banking provisions like online banking.
If you can keep your balances notably above the zero-mark continuously for six months a year, some banks could allow you to upgrade to a regular checking account.
Besides, a close examination of the fine-print would reveal that a second chance checking account is less costly than check-cashing services. Moreover, it has online (not mobile banking) platforms to help you monitor your balances and notice if the balances are running low.
When should I consider opening a second chance account?
If you make a mistake like defaulting to clear an account fee, exceeding your overdraft limit, or writing a bad check, the financial institution may report you to the ChexSystems.
ChexSystems is a data center that files records of consumers based on their banking history – especially the “bad records.”
If you continually make mistakes and repeatedly appear in the ChexSystems database, you might be at the risk of banks refusing to approve a new account if they find you on that list.
Additionally, banks check your credit score when considering your application for a new account.
Since your score is a general snapshot of your fiscal habits and a representation of how you handle credit, banks use this information to evaluate the type of consumer you are.
For instance, if you register for an overdraft protection service that debits your lines of credit or savings account, any related transfer could show up on your credit account. ‘
That said, two significant elements can hinder you from opening a new account: credit score and ChexSystems database.
If these two elements hinder you from opening an account, you might resolve to open a second chance account to have a fresh start of your banking.
While not all banks have the provision for second chance accounts, those with this provision acknowledge that the applicants are looking to have a fresh start and offer straightforward ways to open the account.
Selecting a second chance account
Different banks have varied monthly fees and minimum balance requirements for their second chance accounts.
Some have expensive monthly charges of up to $20 and don’t issue checks or debit cards to cardholders.
When choosing a second chance account, select one with little or no monthly fees, zero minimum balance requirement, and services such as access to debit cards, online bill payments, and check writing services.
Best Checking Accounts for Bad Credit
Wells Fargo Opportunity Checking
The Wells Fargo Opportunity Checking gives clients with bad credit history the typical features of a standard checking account.
As one of the largest financial institutions, Wells Fargo is found in most states across the US.
The bank has reasonable provisions for people with bad credit since it’s a reputable organization and has a wide range of features and benefits.
The most noteworthy element that makes this bank stand out is that second chance accounts have features that are close to those of a standard account.
Mobile banking and handset alerts warn you of fraudulent activity, low balances, and approaching due dates.
A platinum debit card that has a zero liability protection against dubious charges
Generally, the account has the following set of features:
- An initial minimum deposit of $25.
- Access to over 5,500 bank branches and more than 13,000 ATM outlets.
- Online banking with provision for bill payment.
- “My Spending Report” coupled with “Budget Watch” to track your spending.
The Wells Fargo opportunity bank comes with a monthly service fee of $10 and a requirement of a minimum deposit of $25. Besides, the bank charges $35 for overdraft and returned items as well as $2.5 for withdrawal and $31 for a stop payment.
To avoid the monthly service fee of $10, you can either maintain a minimum balance of at least $1,500 or have at least one qualifying direct deposit totaling to $500. Additionally, you can have ten or more recorded debit card payments to qualify to overwrite this charge.
Pros
- The initial deposit is reasonable for someone with bad credit – $25.
- The bank has both online and mobile banking facilities.
- The monthly service fee can be waived using the three options.
- It has “my spending” and “budget watch” to help you better manage your finances.
You can have overdraft protection for a savings account.
Cons
- The bank charges a 3% purchase fee for debit cards when you make international purchases.
- It is not available in all states in the US
- If you can’t meet the criteria for waiving the $10 monthly fee, you’ll have to pay it continually.
Chime Bank
Unlike several other banks, Chime bank isn’t a “bank” in the traditional sense since it lacks physical locations and assets.
It’s a fully functional online and mobile bank with all the banking features accessed through mobile handsets.
Since you can’t drive to the bank branch to make a deposit, this bank has FDIC insurance, so you won’t have to worry about your money’s safety.
The bank has more than 75,000 5-star app ratings that make it one of the best banks for customers. Besides, many clients praise it for user-friendliness and convenience in opening an account, making transactions, and depositing paychecks.
Pros
- It has zero maintenance and no overdraft fees
- You don’t have to make a minimum payment to open an account nor have a minimum balance requirement.
- Chime bank doesn’t use ChexSystems, so a previous bad credit history won’t stop you from opening an account.
- The bank has a mobile banking provision to send money or deposit checks directly.
- You can access direct paycheck deposits two days earlier than in standard banks.
Cons
- The bank has no physical branches, so accessing customer support is through phone, mail, or the application.
- ATM withdrawal fees are substantially high – $2.5.
GoBank
GoBank online checking is an online account that is part of the Green Dot Bank.
As an online bank, it works more similarly to Chime Bank since it has no physical branches.
To open an account, you’ll go through the bank’s internal fraud check – that’s incredibly easy to pass since your application won’t be rejected because of negative items or bad credit.
With a GoBank account, you’ll have access to everything in a checking account, and your funds will always be FDIC protected.
The account comes with all the services you’ll expect from a checking account, which include a $0 initial deposit, online and mobile banking through which you receive account alerts, and make check deposits.
You can make PayPal transactions using this account or a Debit MasterCard or Visa Card – without liability protection against unauthorized charges.
From having access to more than 42,000 ATMs to the provision to deposit cash into the account in more than 100,000 retailers, the GoBank account is incredibly flexible.
The monthly maintenance fee is $8.95, with the possibility of being waived with deposits of at least $500, but there are no charges for overdrafts.
However, if you deposit money through a retailer, there is a $6.95 fee per deposit, and the bank also charges $2.50 to use a non-network ATM.
Pros
- No overdraft fees of penalties for non-sufficient funds
- The bank has a Budget and Fortune Teller to help you manage your finances.
- You’ll be eligible for a savings account in the future.
- Access to large ATM networks, as well as the ability to deposit money in more than 100K outlets.
Cons
- The ATM withdrawal limit is $500 per day.
- There’s a $4.95 fee of a deposit you make through a retailer.
- No physical bank branches.
- Personal check deposits have a limit of $500 – $1000 per day.
Bbva
This bank has approximately 650 branches in seven states across the US. It also offers online banking in all the states.
With over 55,000 free ATMs across the country and one of the top 25 most significant commercial banks in the country, this bank is part of the few institutions that offer second chance checking accounts.
When opening a checking account with this bank, you should first apply for a standard checking account, and you’ll be offered a second chance checking if you don’t meet all the requirements.
To open the account, you’ll need $25, and you’ll perform all transactions using online and mobile banking as well as a visa debit card.
The account comes with unlimited check writing as well as a fee of $13.95, which is charged monthly with no possibility to waive.
Pros
- A significantly low fee of $25 is what you need to open an account
- You don’t need a credit check to open an account.
- Using the Visa Debit Card guarantees unlimited check writing, mobile deposits, online bill payments, and cashback rewards.
- After one year, you’ll have the opportunity to upgrade to a standard checking account.
Cons
- The bank charges a monthly service charge of $13.95
- It has a range of expensive fees – from $3 ATM fee when you use out of network to $38 insufficient funds, and $15 deposit item returned fee.
Radius Bank Essential Checking
One of the significantly prominent elements of this bank is its powerful technology to help you manage your money, especially if you haven’t had a perfect banking record in the past.
With a minimum deposit of $10 and online banking with Bill Pay and mobile check deposits, the checking account has a $9 monthly service charge and has no provision for a charge waiver.
A daily debit card limit is $500, and you can add Apple Pay, Samsung, and Google Play to the card.
Pros
- The bank offers paper checks – something unusual for online banks
- It has a financial dashboard to help build, track spending, analyze trends, and link other accounts.
- You can upgrade to rewards checking account after 12 months.
- The mobile wallet for your debit card allows you to link with Apple Pay, Samsung Pay, and Google Pay.
Cons
- You cannot waive the monthly service charges
- The bank has no physical branches.
Netbank
NetBank is an extension of Axos Bank and is mainly meant for people who are in the ChexSystem.
It is a fully online bank without physical branches, and it offers full-checking services using the online or mobile banking platform.
With a minimum deposit requirement of $50, you’ll be eligible for a free Visa Debit Card and overdraft protection program.
All transactions are done using the Online Banking platform, and you can deposit cash using the Green Dot Reload, and the bank always monitors your account for potential fraud.
Besides, the monthly service fee is $6.95 if you have a direct deposit, and if you have none, the fee rises to $8.95.
One of the most excellent perks of this bank is that once you establish a good credit report and build a solid relationship with the institution, you’ll benefit from a mammoth of checking account features.
From Cashback Checking payments of up to 1% on transactions requiring a signature to 1.25% APY interest, your service fees will reduce significantly.
Pros
- The bank has a wide range of checking account options to help you improve your credit
- You can add cash to your account using participating retailers.
Cons
- Unlike Radius Bank Essential Banking, it offers no paper checks
- There are no bank branches; all transaction and customer support platforms are online
- To reload your account at Green Dot, you’ll be charged $4.95.
Radius Bank Essential Banking
Radius Bank is designed for people who haven’t had a good credit history in the past.
It has powerful technological features that help you to not only tracking spending but also predict and track the usage of your money.
You’ll need an initial deposit of $10 when opening the account, and it offers online banking with Bill Pay.
Besides, online and mobile banking features help you perform mobile check deposits and also comes with paper checks.
You can make payments to friends and family using Venmo, your visa card, or link it to Apple Pay, Google Pay, or Samsung Pay.
There is a financial dashboard on the mobile banking platform to help you build and track your spending, analyze business trends, monitor your net income, and link other accounts.
After a year of usage coupled with a positive banking history, you’ll stand a chance to upgrade to a Rewards checking account.
The account has a monthly charge of $9, which you cannot waiver.
Pros
- The bank offers paper checks – something that is rather uncommon in online banks
- You can link your debit card with wallets like Apple Pay, Samsung Pay, and Google Pay.
- The mobile app has a financial feature that helps you monitor and track your external account usage.
- After 12 months of positive usage, you’ll be eligible for the Rewards Checking program.
Cons
- The bank has no provision to waive the monthly fee.
- It has no physical branches.
Peoples Cash Solution Second Chance Checking
This bank might be the right answer for you if you’ve been trying to open an account without much success.
Even if you have bad credit and your records are in the ChexSystems or TeleCheck, this bank can offer you the opportunity to open an account with them. However, if the bank finds fraudulent activity in your previous bank accounts, they wouldn’t open an account for you.
The bank is based in Texas but has its services stretched out across all the 50 states. It offers a debit MasterCard, personal checkbook, online banking with bill pay, and mobile money transfers.
After 12 months of excellent usage, you’ll be eligible for an upgrade to the Regular Checking account.
The best features include free ATM usage only for those owned by Peoples Cash Solutions and MasterCard ATM access. However, the latter is limited for people who have signed up for it, and you’ll incur a transaction fee of $2 for every transaction.
When opening the account, you’ll need a minimum of $30, and you’ll pay a monthly maintenance fee of $4.95. Additionally, the bank charges a $27.50 overdraft fee, which also applies for non-sufficient funds per item per day.
Since most of the banking is online, the bank charges a $3.95 statement printing fee – which you can avoid by requesting e-statements online.
If you close the account within 90 days of the account opening, you’ll incur a $20 account closure fee.
Pros
- There is online banking and the provision for paper checks
- You’ll upgrade to a Regular Checking account after one year of usage.
- Zero ATM fees as long as you stay within your network.
Cons
- The minimum account deposit of $30 to open an account is significantly high.
- Overall, the charges are cumulatively expensive.
Washington Savings Bank
One of the most excellent perks of this bank is allowing you to start anew with their Online Rewards Checking.
Besides, it has a mammoth of account options, and accessibility is pretty straightforward.
When opening the account, you don’t need to clear your name from the ChexSystem database; passing this check isn’t a requirement.
All you need is a minimum account deposit of $10 and a good internet connection to complete it online.
With an annual fee of $14.95, you can upgrade the account to a free checking plan after one year of good account usage.
The account is accessible to everyone in 50 US states, and it comes with a free EMV MasterCard, free online banking with bill pay, and free e-statements.
Additionally, the mobile banking feature has free budgeting tools to help you manage and track your spending.
After three months of direct deposits, you’ll be eligible for mobile deposits using the application.
Pros
- It has no minimum balance requirement
- You can convert your account to rewards checking account after 12 months of good usage.
- The bank is available in 50 American states.
- The $14.95 annual fee is relatively affordable compared to other plans with monthly payments.
Con
- There is limited access to customer support since most bank operations are done online.
Capital One 360
When considering your bank application, capital one 360 bank does look at the ChexSystems, but it’s not a make-or-break factor.
If you have some history of good credit, but your name is in the ChexSystem database, you’ll still qualify to open a Capital One 360 account.
There is no minimum deposit requirement, and the notable thing about your deposits is that they accrue interests starting from a rate of 0.2%.
Additionally, there is no monthly fee requirement, and you can write checks, access online banking features with bill pay, and make personal transfers.
With a Capital one 360 checking account, you’ll have access to all the bank’s ATMs and 38,000 ATMs under the Allpoint category.
You’ll also have access to mobile banking features that comes with check deposits.
While the bank account has a mammoth of helpful features, the biggest downside is that you cannot use Capital One teller to perform any transactions.
Pros
- The account has no minimum deposit requirement
- Deposits can accrue interests starting from 0.2%
- The mobile banking has a mobile deposit feature
- Access to approximately 38,000 Allpoint network ATMs
- Fair monthly fees
Cons
- You cannot use a Capital One teller to deposit or transfer money
- The bank uses the ChexSystems database before approving a new account
Corporate America Family Credit Union
A fresh start using the Corporate America checking would give you a chance to build a positive credit history from scratch.
To qualify for this account, you must have a minimum balance of $100 in a savings account – also known as a Regular Share account.
Additionally, you must meet specific credit union requirements before getting approval.
One of the most excellent perks of this account is that there is no minimum balance requirement, and you’ll receive a free Visa debit card, free direct deposit and free access to online and mobile banking.
The account has a monthly maintenance fee of $10, and you’ll have access to shared branches and ATMs throughout the country.
One most significant element of this bank is that they would love to see you succeed. They have online study courses and tools to help you better manage your finances and have control of your account.
It treats all clients with care and asks you to donate $5 to the Hope Group to help everyone become a member. The donation gets channeled to people in colleges and universities that would go to their general scholarship programs.
Overall, having this account and making the donations would be of good cause and guarantees you to one of the top credit unions in the country.
Pros
- You’ll have a free Visa debit card with the account
- The monthly maintenance fee is $10; which is reasonable
- You’ll be eligible to the union membership
Con
- The minimum balance requirement of $100 is relatively high for this account.
Woodforest National Bank
The preliminary step to be eligible for a second chance checking account is to go to one of the bank’s branches to apply.
They have locations in 17 American states, and the branches are approximately 747 – making this bank an appropriate choice for someone who would love visiting the branch often.
To open a Woodforest National checking bank account, you’ll need an initial deposit of $25 and pay an additional fee of $9 – which is a one-time fee; hence it only happens once.
This account has a monthly maintenance charge of $9.95 if you have a direct deposit, but if you have none, the monthly fee would be $11.95.
It allows overdraft transactions with a fee of $32 per item and $15 to set up a debit card.
Besides, the bank has a massive network of ATMs and allows you to perform free transactions as long as you use an in-network machine and also has a provision for free electronic bank statements.
Pros
- The monthly maintenance fee ranging from $9.95 to $11.95 is affordable
- The branch distribution is fairly even; spanning in 17 states with over 740 outlets
- You can access a large network of ATMs as well as free electronic bank statements.
Cons
- You’ll need an initial deposit of $25 when opening the account
- Overall, the combination of fees makes the cumulative charges incredibly high.
Aspire Federal Credit Union
Also known as “Fresh Start Checking,” Aspire bank gives people with bad credit a second chance to start all over again if you previously had bad credit.
To qualify for this account, you’ll have to deposit 100% of your paycheck every month.
Pros
- You’ll have a free debit card linked to your account
- It has no monthly maintenance fee
- Access to a colossal network of over 70,000 ATMs – that have no fees as long as you stay within the network
Cons
- You have to make a 100% deposit of your paycheck amount when opening the account
- Can’t access any fraudulent activity reported in your banking record.
First American Bank
Primarily, this bank is accessible to residents of Wisconsin, Illinois, and Florida, and has a colossal number of ATMs stretching out across the nation.
If you’ve had a bad credit history, this bank could be one of the best options for you to consider.
Pros
- You’ll have unlimited check writing
- Online and mobile banking features
- Access to over 55,000 in-network ATMs throughout the US.
- There’s no monthly balance requirement
- There is free check imaging with your online account
Cons
- The account has a monthly maintenance fee of $9.95
- You need a minimum deposit of $50 to open the account.
GTE Financial Banking
The “Go Further” extension from FTE Financial helps you align and get right on track if you haven’t had a good banking history in the past.
Based in Florida, this bank is accessible to everyone in the 50 US states through the online platform.
If you don’t meet all requirements for a traditional account, having the Go Further account would make you eligible for that program after 12 months of usage.
With a $9.95 monthly maintenance fee, you’ll have the option to waive this fee as long as opt to receive e-statements, make at least 15 transactions per month, and have a deposit of at least $500.
As one of the most prominent credit unions in the US, GTE Financial has a straightforward membership process that has easy requirements and an online application process.
The account includes free linkage to a debit card with accompanying rewards, mobile and online banking requirements with free bill pay and money transfer solutions using Popmoney service.
Pros
- You’ll have a free debit card linked to the account
- As long as you fulfill the three requirements, you can waive the monthly charge.
- You’ll be eligible for rewards when you make payments and purchases using the debit card.
- Mobile and online banking feature money transfer solutions.
Cons
- If you can’t meet the requirements for a monthly fee waive, you’ll have to pay it continually.
- You’ll access customer support online since most bank operations are digitized.
The alternatives if you’re denied a checking account
If your attempts to open a second chance account with all financial institutions hit a brick wall, paying bills on time can still be a daunting process.
Generally, two primary reasons might make your application for a second chance checking account unsuccessful: you either don’t meet basic requirements or don’t meet statutory requirements.
Some banks require customers to be at least 18 years or be a permanent resident of the United States. Other reasons could probably be based on your credit score or the information in the ChexSystem database that shows that you’ve not been a good client for a checking account.
That said, you’ll still have another chance to make payments without a checking account.
Prepaid debit cards
No doubt, these cards are incredibly convenient when making payments, although they have significantly high fees.
There is a significant disparity in terms of the features offered by different prepaid card providers, which makes it necessary for you to check various providers before choosing one.
Keep in mind that while prepaid debit cards would help you clear all bills on time, they would not help you rebuild your credit.
Secured credit cards
One of the most excellent perks of secured credit cards is that they can help you rebuild broken credit.
You’ll need to make some deposit that would act as collateral, and would also be a limit to the amount you can spend.
If you use your card responsibly and keep the utilization ratio, preferably below 30%, you’ll grow your credit significantly as you pay your bills.
Like prepaid debit cards, you’ll have to scour the market and check all options before choosing the best card.
Money orders
If you have a huge bill, a money order would be safer than a cash payment.
They’re easier to use than going to banks or post offices, and you can track whether the funds have been spent and stop the payment when the need arises.
However, money orders have limits – often within $1,000 per transaction, and the fees can significantly pile up if you use money orders frequently.
Besides, some companies don’t have the provision for this payment option, so you need to consider all viable options before settling on a money order.
Online solutions – Checking Accounts for Bad Credit
Some reputable merchants have electronic wallet systems that let you store your cash and make payments online.
For instance, PayPal has a limit of $10,000 for sending, receiving, and holding cash in the wallet.
Most lack FDIC insurance like traditional banks, so you need to find the best online solution before making a decision.
Final Thoughts
If you’ve been going for months without a bank account because of poor credit, you now know the feasible alternatives.
Keep in mind that banks offering second chance accounts have features similar to those of a standard account.
You need to choose an account that would ease your financial obligations and save your money and have an excellent interactive interface.
Pay your bills on time, keep credit balances low, and leave old accounts open to keep your credit score significantly high.
It would be great if you started working on getting your name out of the ChexSystems database to avoid future issues with opening a checking account. Legally, you’re eligible for a free credit report each year, and it would be helpful if you checked the report for any errors or fraudulent activity.
Overall, maintain healthy financial habits and always check your report for errors or fraudulent activity.
