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Personal Finance

What Is Second Chance Banking?

If you've recently been denied for a checking account, second-chance banking can be a good alternative. The approval requirements are typically lower than traditional checking accounts, but they also come with some limitations.

What Is Second-Chance Banking?

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 report, it can deny your application.

Second-chance bank accounts give you an opportunity to 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.

How Does a Second-Chance Checking Account Work?

A second-chance checking 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.

As you use the account, it can help you build a positive history with ChexSystems as you wait for previous negative records to fall off your report, which can take up to five years.

Not all major banks and credit unions offer second-chance checking accounts, but many of them do. Some nationwide examples include:

  • TD Ameritrade
  • Green Dot
  • Wells Fargo
  • Capital One 360
  • BBVA Compass
  • MemoryBank
  • Radius Bank

You can also get a second-chance checking account with a regional bank, local credit union or an online bank. Chime, in particular, charges no monthly maintenance fees and offers overdraft protection and direct deposit.

That said, many second-chance checking accounts do charge monthly fees, and you don't always have an option to get them waived. Also, you may not get access to all the same services you would with a traditional bank account, such as overdraft protection or access to checks or direct deposit.

As a result, it's important to shop around to find a bank or credit union that will give you the most features at the lowest cost.

What You Can Do After Being Denied for a Checking Account

If you've misused a bank account in the past or have been a victim of an error or fraud, you may have a hard time opening another account. Some potential misdeeds include bouncing checks, leaving an overdraft balance unpaid, abusing a debit card or ATM, or applying for too many accounts in a short period.

If you are denied for any of these reasons, the bank or credit union is required to tell you why. Once you have this information, the first step is to get a copy of your ChexSystems report. By law, you can get a free copy of your report at least once every 12 months, plus anytime you've been denied a checking account for reasons listed on your report.

You can get a copy of your report by:

  • Requesting one through the ChexSystems website
  • Calling (800) 428-9623
  • Downloading and mailing a request form to Chex Systems Inc., Attn: Consumer Relations, 7805 Hudson Road, Suite 100, Woodbury, MN 55125
  • Downloading and faxing a request form to (602) 659-2197

When ChexSystems receives your request, you'll get a copy of your report in the mail within five business days.

Once you have it, look through the report to spot potential errors or fraud. If you find instances of either, you can dispute them directly with ChexSystems. Then focus on addressing other potential problems.

For example, if you were denied an account for not paying back an overdraft balance, pay it off as quickly as possible, either in full or at a discount if you can negotiate it. After you've done this, you can request that the collection agency or bank remove the negative item from your report.

Keep in mind, though, there are some things you can't remove from a ChexSystems report. If that's the case with yours, the negative item will typically fall off the report naturally after five years.

Bottom Line

Second-chance banking isn't always ideal, but it's a solid option if you've been denied a traditional checking account.

While prepaid debit cards are another alternative, your activity won't be reported to ChexSystems, and it won't necessarily give you a better chance of getting approved for a traditional checking account the next time you apply.

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.


Want to instantly increase your credit score? Experian Boost helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.

This service is completely free and can boost your credit scores fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.

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