What is a Second Chance Checking Account?

If you've ever tried to open a bank account and were denied you know how difficult the experience can be. Most likely you were denied because of a bad bank or credit history. Most banks use ChexSystems, a consumer reporting agency that tracks your banking history. If you've had bounced checks, excessive overdrafts and had an account closed due to insufficient funds then ChexSystems may blacklist you making it hard to open a new account.

This is where a second chance bank account can be a lifesaver. These accounts do not use ChexSystems to screen applicants and are perfect for those who need a second chance to prove that they can use their bank account responsibly.

An FDIC survey indicates that one in five banks offers second chance accounts. Sometimes these accounts have higher fees and more restrictions than traditional accounts but are still less expensive and more convenient than the alternatives of paying check-cashing and money-order fees.

If you are shopping around for a second chance account, be sure to compare such items as: the dollar limit on daily withdrawals; deposits of only "official" checks, such as cashier's checks or money orders; requirements to open and manage a savings account for several months before you can have a checking account; and only allowing debit card transactions, which can limit withdrawals to the balance in your account (i.e., overdrafts are not allowed).

Look for a smaller bank which places more emphasis on helping customers and forming a relationship with you. They're not as risk adverse as some of the bigger banks. Explaining your situation in person may prove to be more effective than filling out an online application.

If you think there has been a mistake and your bank record is good, you can request a free consumer report from ChexSystems once every twelve months.

Finally, be wary of unscrupulous companies that offer to "repair" your checking account or credit history, especially if they charge a fat fee and "guarantee" their results. Reporting agencies are under no obligation to remove any adverse information. Under the Fair Credit Reporting Act (FCRA), a checking account closed by an institution because of mismanagement, and other negative information can continue to appear in credit reports for up to seven years.

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