One option available for customers with troubled financial history is to open a second chance checking account. Second chance checking accounts are for people that have had past banking transgressions and face the possibility of having difficulty when opening a new checking account.
When someone overdraws their checking account the bank usually gives that person a grace period in which to repay the debt. If the debt is not repaid then the account closes with a negative balance. The bank then reports the person to Chexsystems for the unpaid item.
Chexsystems is an agency that reports a person’s past banking history. Once on the Chexsystems list, a name will remain on the list for 5 years. The bank is under no obligation to remove a person’s name from the list even if the debt is repaid.
In most cases, when someone is listed on Chexsystems and hasn’t repaid the original debt to the bank it may be tremendously difficult to open a new checking account at any bank that uses Chexsystems. It has been reported that over 85% of all banks nationwide refers to Chexsystems when opening new accounts.
Second chance checking accounts are made for people that have trouble opening a new account due to bad banking history or due to Chexsystems. Depending on the situation this does not guarantee that the bank will let this customer open an account, but second chance checking accounts are designed for people with minor banking infractions. In other extreme cases such as fraud, the bank will more than likely not let you open any account.
There are a few differences between regular checking accounts and second chance checking accounts. It is common practice for banks to charge a small monthly maintenance fee associated with a second chance account. Also, second chance checking accounts might have account limitations such as daily spending and withdrawal limits.
Depending on one’s location it might be difficult to find a bank that offers second chance checking. In that case there are still options available online. When opening an account online, it is best to go with a recognized FDIC insured bank.
Another option that has been gaining popularity is the use of prepaid debit cards as an alternative to a checking account. These day’s with prepaid debit cards one can electronically deposit their paycheck, make purchases, withdraw cash from an ATM, pay bills online, and make electronic transfers. With similar features to a regular checking account, prepaid debit cards have become the preferred choice of many.
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