What Is Second Chance Banking?

Quick Answer

Second chance bank accounts provide consumers who have been denied a checking account with access to basic banking services. However, some important features may be missing, and you may need to pay a monthly fee that isn't waivable, so shop around and compare options before you apply.

Woman looking at laptop in cafe, researching second chance banking

Second chance banking makes it possible for people who can't qualify for a traditional bank account to still access basic banking services. In particular, low-income communities, members of minority communities and people who have been recently incarcerated can benefit from a second chance bank account.

The approval requirements for these accounts are typically lower than traditional checking accounts, but some of them can also come with some limitations. Here's what you need to know.

What Is a Second Chance Bank Account?

A second chance bank account is an account where the bank or credit union either doesn't check your ChexSystems report or is willing to look past your previous missteps.

When you apply to open a checking account, banks and credit unions typically check your ChexSystems report. Like a credit report, your ChexSystems report shows negative bank account actions and activities, such as an involuntary account closure and unpaid negative balances.

If the bank or credit union deems you're too much of a risk based on information in your ChexSystems report, it can deny your application.

Not having access to a bank account can be inconvenient and costly. Many unbanked consumers turn to high-cost money services for basic needs, such as cashing a check, obtaining a money order or paying bills, making life more expensive and complicated.

Second chance bank accounts give you an opportunity to access some of these basic banking services while you rebuild your banking history and get back in the good graces of other banks and credit unions. They typically don't require a high minimum balance, if any, and some don't even charge fees.

Which Banks Offer Second Chance Bank Accounts?

Many major banks and other financial institutions offer second chance bank accounts. Here are just a handful of nationwide examples:

Capital One 360 Checking Account Monthly fee: $0

Minimum to open: $0

Minimum balance: None

Overdraft fees: None

Chime Second Chance Banking Monthly fee: $0

Minimum to open: $0

Minimum balance: None

Overdraft fees: None

GTE Financial Go Further Checking Monthly fee: $9.95; waivable if you enroll in e-statements, make $500 in aggregate deposits per month and make a combination of 15 monthly debit and/or credit card transactions

Minimum to open: $5

Minimum balance: None

Overdraft fees: $8

Varo Second Chance Banking Monthly fee: $0

Minimum to open: $0

Minimum balance: None

Overdraft fees: None

Wells Fargo Clear Access Banking Monthly fee: $5; waivable if the primary account owner is between the ages of 13 and 24

Minimum to open: $25

Minimum balance: None

Overdraft fees: None

Note: The Capital One 360 Checking Account isn't advertised as a second chance bank account, but Capital One does not reference your ChexSystems report when you apply, so issues with other banks won't stop you from getting approved.

Is a Second Chance Checking Account Right for You?

A second chance bank account can be a good fit if you're having trouble getting approved for a traditional checking account. While some of these accounts limit what you can do, others offer full banking services and little to no fees.

Most importantly, these accounts can give you access to critical services, such as check-writing privileges, mobile deposits, bill pay and more. Just keep in mind that many of these financial institutions are online only, so if you need to cash checks, check the bank's physical branch footprint to determine whether it's a good fit.

How to Open a Second Chance Bank Account

Here are some steps you can take to open a second chance bank account:

  1. Shop around. Start by researching and comparing top second chance bank accounts like the ones provided above. As you consider your options, look at potential fees, deposit requirements, services and limitations. You can also check to see if the bank will allow you to upgrade your account in the future with responsible use.
  2. Apply with the bank. You can usually apply online, but if the bank has physical branches, you can also choose to apply in person. You'll likely need to provide some basic information about yourself and a government-issued photo ID to get started.
  3. Fund your account. Funding a bank account can be difficult if you don't have another bank account from which you can transfer money. Fortunately, many of these accounts don't require opening deposits, so you can deposit a check through the bank's mobile app or set up direct deposit to fund the account. In some cases, the bank may allow you to fund your account with a credit card, but this option may trigger a cash advance on your card, which can be costly.

Alternatives to Second Chance Bank Accounts

Depending on your situation, you may also want to consider a prepaid debit card as an alternative to a second chance bank account.

Prepaid debit cards allow you to spend only what you load onto your account, and they offer many of the same basic services as checking accounts, including direct deposit, mobile check deposits and bill pay.

However, they may not offer check-writing services, and you may have to pay monthly maintenance fees and even load fees if you want to add money to your account with cash.

The Bottom Line

Second chance banking isn't always ideal, but it's a solid option if you've been denied a traditional checking account. As you work to get back on the right track with your banking, also consider getting a free copy of your credit report.

While your credit history doesn't have a lot of influence on whether you can get a better bank account in the future, building your credit can help you improve your overall financial standing. Doing so can prevent some of the issues that may have caused your current predicament from happening again.