If you have come to a point where no banks or lenders are happy to offer you regular checking accounts because of your undesirable banking history, all hope is not lost. A 2nd chance checking account is designed specifically for those people who are being turned away. Not all banks and lenders offer this type of checking account but there are plenty that do, a quick search online should find a comprehensive list of providers for you. You may even find banks with free checking account promotions.
It is helpful to understand why and how you have got to this point. If you are an ‘undesirable’ customer for a bank or lender you are probably someone that has in the past continuously overdrawn their account when there was no overdraft facility, possibly continuously missed credit card repayment dates, maybe never had enough money in your account to cover bank fees or have any number of other undesirable financial traits. At some point your bank would have decided enough if enough and closed your accounts, or you decided to leave whichever came first. Even if they have maintained your current accounts you name would have been registered in an online database called ChexSystems.
ChexSystems is a database that all banks and lenders have access to. Before opening an account for a new customer a bank or lender will usually complete a credit check as well as a check in ChexSystems. If your name appears on this database they will not offer their standard checking accounts to you. If they have a second chance checking account product then they will offer this to you instead. So all hope is not lost!
These second chance accounts are really a way for you to continue banking in the hope that your banking practices will improve and you’ll soon be a desirable customer for them again. While in the process of proving yourself it is likely that there will be some or several restrictions on your checking account.
Restrictions could be almost anything you could imagine. Examples include:
- Mandatory transfer into savings account each week or month
- No fees if a minimum balance is maintained
- High interest rates
- No overdraft facility
- No credit cards, only debit transactions
- No checkbook
- Mandatory trial period
- Bank approval for withdrawals over a certain amount or over a certain number per day
While the restrictions may seem harsh to some people, they are often a good idea to get you back on track. Once you establish a good pattern of banking then some of the restrictions may be lifted, it all depends on the bank or lender and their second chance checking products. If anything the strictness of these checking accounts can only do more good than harm to those struggling with their finances.
It is worth remembering that your name can remain in the ChexSystems database for up to 5years. So while it is called a second chance checking account perhaps a more accurate name could be the last chance checking account.