Second Chance Banking: Second Chance Bank Accounts, Banks, and More | Clear Access Banking fees and details | Open a second chance bank account
What Is Second Chance Banking?
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Second-chance banking can help put your finances back on track. Discover more in this interesting tutorial from PNC.
If your banking history prevents you from opening a bank account, a second chance banking account could be key to getting you back on a strong financial footing. But what is second chance banking, and how do second chance banking accounts work?
Defining Second Chance Banking
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Second chance bank accounts are intended for people whose past financial transactions make it impossible for them to open a standard checking account. This may include those who have been denied an account owing to too many overdrafts or unpaid fees.
How Second Chance Banking Works?
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When a person applies for a new checking account, the bank usually uses ChexSystems to do a check on them. ChexSystems is a consumer verification and reporting service that collects data about individuals' banking histories, similar to credit reporting agencies.
A negative ChexSystems score can result from specific negative banking events, such as a history of writing bad checks, involuntary account closures, or excessive overdrafts. This can discourage people from opening checking accounts because they believe it would be too risky for them to become customers.
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For second chance bank accounts, issuers may opt not to check a customer's ChexSystems score or to overlook a negative report. Although these accounts may not offer all of the services and features that standard bank accounts do, they still provide users with many of the same benefits. They can also help clients with low ChexSystems scores repair their banking records.
The Benefits Of Second Chance Banking
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If you are unable to obtain a standard bank account, there are numerous reasons why applying for a second chance banking account could be advantageous.
Get Access To Important Bank Features and Services for Second Chance Bank Accounts
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Second chance banking enables users to access some of the most important features and services of a standard checking account. A second chance account, for example, may provide customers with the ability to utilize a debit card to make purchases and complete transactions at an automated teller machine. It may also allow users to access a checkbook to pay bills and other commitments. Second chance bank systems also allow individuals to obtain direct deposit wages from businesses. It also implies that account users can use a mobile banking app and all of its capabilities, such as the Zelle® payment system and automatic bill pay services.
Keep Your Money Safe in Second Chance Bank Accounts
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Second chance bank accounts also allow customers to store money at banks that are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC protects deposits in qualified accounts up to the maximum limit. Having your money insured by the federal government is significantly more secure than having all of your funds in cash at home.
Rebuild Your Bank History with Second Chance Bank Accounts
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If you open a second chance bank account and operate it correctly (avoiding overdrafts, paying fees on time, etc.), you may be able to rebuild your ChexSystems score.
In fact, if you demonstrate appropriate usage of a second chance bank account, your bank may let you create a regular checking and/or savings account.
It's worth mentioning that bad ChexSystems marks will remain on your consumer report for five years. Opening and keeping a second chance bank account allows you to improve your bad ChexSystems score in a shorter amount of time.
However, second chance bank accounts do not assist consumers repair their credit ratings, according to Equifax, Experian, and TransUnion.
Save Money in Second Chance Bank Accounts
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Using a second chance bank account allows you to avoid relying on a check-cashing service to obtain your money. Check-cashing firms often impose high fees that deplete your hard-earned money.
Furthermore, having a checking account with a bank or credit union allows you to pay payments without having to purchase money orders, which might incur large fees.
Potential Drawbacks and Considerations
Of course, there are some downsides to using a second chance bank account.
Limited Features and Services
Not all second chance bank accounts may provide the same services as typical checking accounts. For example, a second chance account may not allow users to access a book of paper personal checks. Alternatively, the account may limit the number of transactions the account holder can make using their debit card.
In addition, many second chance bank accounts do not allow holders to participate in the bank's overdraft protection program. After all, one of the primary reasons for opening a second chance account is to demonstrate that you can prevent overdrawing on your account in the first place.
Fees and Requirements to open a Second Chance Bank Accounts
Many second chance bank accounts have monthly fees or service charges. Depending on the supplier, these fees may be waived. Furthermore, the second chance account may have specific financial conditions, such as a regular direct deposit, a minimum deposit or balance, and so on. When deciding which second chance bank account to apply for, it's important to read all of the fine print to ensure you're informed of any additional costs or conditions.
What to Look For In A Second Chance Bank Account
Before applying for a second chance bank account, there are several considerations to keep in mind.
Online Only or Brick-and-Mortar Bank?
Because of the Internet Age, many contemporary banks are completely online. These banks do not have physical facilities where customers can chat with a teller or branch manager or make cash deposits. While some online-only banks provide second chance bank accounts, many may not provide the complete range of financial services that a regular brick-and-mortar bank does.
Fees and Requirements about Second Chance Bank Accounts
As previously stated, many second-chance accounts include monthly fees or service charges. When selecting an account, review all of the bank's policies. You could save money by choosing an account with reduced fees.
Features of Second Chance Bank Accounts
Again, some second chance accounts may lack the functionality found in a standard checking account. Before opening an account, make sure it has all of the services you need, such as mobile banking or the usage of a checkbook.
Bank On Certification
Bank On is a Cities for Financial Empowerment (CFE) Fund initiative that encourages banks and credit unions to provide safe, low-cost accounts to unbanked people. The Bank On program certifies accounts that meet specific criteria, such as:
1) Non-waivable monthly payments of $5 or less, if the monthly maintenance price is not waived.
2) If the monthly maintenance cost is waived, it will be $10 or less; payments must be waived through at least two methods.
3) Minimum opening deposits are $25 or less.
4) No overdraft fees.
5) There are no additional costs for opening or deleting the account, maintaining a low balance, or inactivity
6) There are no fees for using in-network ATMs.
PNC Bank offers Foundation Checking, a second chance bank account that meets all of these requirements and has been certified by Bank On.
Alternatives to Second Chance Banking
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If you need to pay your bills and make purchases but do not qualify for a standard bank account, you have a few options besides a second chance account or relying solely on cash.
A prepaid debit card is one possible solution. These cards can be used both online and in stores, just like a "regular" debit card. However, they are not linked to checking or savings accounts. Instead, you can fund these cards with cash when you buy them from a partnering shop or bank. After you've spent all of the money you've put into the card, you can refill it with more money.
Prepaid debit cards have the potential for high fees. These cards frequently include monthly maintenance costs, transaction fees, ATM fees, reload fees, and balance inquiry fees. Typically, these fees are deducted automatically from your card balance.
Another option is to buy money orders to pay your bills. Money order fees vary by dollar amount, but they can add up over time. In addition, some money order issuers, such as the United States Postal Service (USPS), limit the amount that can be included in a single money order.
The Bottom Line about the Second Chance Bank Accounts
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If you're one of the millions of Americans who are unbanked — that is, don't have a checking or savings account — you may be missing out on useful features and services that might help you save money on money-order costs. If your banking history prevents you from opening a standard account, a second chance bank account may allow you to take use of some of the benefits of a bank while also helping you restore your credit.