Second Chance Banks – Best Banks Offering You Another Shot
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
Unlike your parents or spouse, some banks aren’t too willing to forgive mistakes.
If you overdraw your account a few times and don’t pay the bank fees, you’re suspected of fraudulent activity, or have your account closed involuntarily, banks may not allow you to open a new account for five years. A low credit score could be reason enough to deny an application.
Not having a bank account can be a hassle and expensive. You may have to use financial services such as check cashing businesses and payday loans, which can be much more costly than banks' fees. Access to credit cards can also be difficult, forcing many unbanked people to use prepaid debit cards which often have many fees.
Second-chance banks can help the unbanked and underbanked, which total 5.9 million American households, or 4.5% of the population, according to a 2021 report by the Federal Reserve. Four percent of Americans are unbanked, meaning they have no bank account and must rely on money orders, pawnshop loans, and other alternatives for their financial needs.
Second-chance banks don’t run a credit check. They won’t consider your bad credit or past financial mistakes. They offer checking and savings accounts for free or have a few fees, and the FDIC insures deposits.
In this article
What are second-chance banks?
Second-chance banks are precisely what the name implies. They give former bank customers a second chance at having a checking or savings account. It may not be at the same bank that closed their account but at an online-only bank or sometimes at a bank with physical locations.
They will likely charge fees for basic services that are generally free at traditional banks and credit unions. These can include fees for withdrawing money, which may be the biggest reason to want a bank account. Some don’t give customers check-writing abilities, overdraft protection, or debit cards.
What they offer is a chance for almost anyone to open a bank account. From there, you can start building a better checking history, which can improve your credit score.
Second-chance banks don’t check with consumer reporting agencies to see if you have any bad marks on your credit report, unpaid fees, or other bank problems.
In this story, we’ll explain how second-chance banks work, what they offer, review fees, and a few second-chance banks, and describe some of their pros and cons.
What might lead you to a second-chance bank?
If your bank account was involuntarily closed or a bank or credit union denied your application to open an account, you may need a second chance bank.
An account can be closed for many reasons, including:
- Inactivity
- Not having enough money in it to meet the minimum balance requirement
- Overdraft fees
- Bounced checks
- Bad credit score
- Negative balance
- Unpaid service fees
- Other unpaid fees
- Fraudulent activity
- Account misuse
If you have a bad banking history at a traditional bank, you may know about it long before your bank closes your account.
This can lead you to use alternative banking sources that can be expensive. The Financial Health Network found that unbanked and underbanked Americans spend $189 billion in fees and interest on financial products, for an average of $3,000 in annual costs per person.
Some of the services they use include:
- Check cashing services
- Money orders
- Prepaid debit card
- Payday loan
- Pawnshop loan
- Auto title loan
How banks find your mistakes
When you apply for a new checking or savings account at a traditional bank or credit union, it will likely review your ChexSystems report for past banking mistakes.
The ChexSystems consumer reporting agency checks past accounts in your name for five years. It checks for closed accounts, overdraft fees, fraudulent activity, and other negative information we mentioned earlier.
A bank can decline to open an account with you for having such negative marks for up to five years, though some may require more time to pass between negative incidents under their own rules.
Benefits of second-chance banking
Second-chance bank accounts offer many of the same services that traditional banks do. These include paper checks, free ATMs, mobile apps, debit cards, direct deposits, and mobile banking.
The costs of second chance banking can range from what you’re used to at traditional banks and credit unions and the high fees the unbanked typically pay at check-cashing and other such services.
Some second-chance bank accounts are free, though you should look out for usage fees that can more than make up for not having a monthly service fee to pay.
But if you stay on top of the possible fees and find ways to avoid them, you can at least have a checking or savings account again to do your banking. And maybe best of all, you can avoid paying high fees that the unbanked often pay.
Best second-chance banks
Shopping for the best second-chance bank accounts that fit your needs is worthwhile. We provide short reviews of some second-chance banks below, with an essential checking account that can make your financial life much easier. Online banking services are standard, including online bill pay.
Chime
doesn’t have any physical bank branches, but it offers many ways to use your money and get the financial services you need.
It has two online banking accounts: checking and savings. A checking account is required before opening a savings account with Chime. Its savings account pays an Annual Percentage Yield, or APY, of 2.00%. Neither account has a minimum deposit or balance requirement. The FDIC insures accounts for up to $250,000 in deposits.
Chime says it has no hidden fees. This means no service fees, no overdraft, and no minimum balance.
The primary way to deposit money into your Chime account is through direct deposit from your employer. Chime allows access to money from a direct deposit up to two days earlier than traditional banks do. Paper checks can be deposited through Chime’s mobile app. Cash deposits can be made at more than 90,000 retailers that work with Chime.
There are two main ways to withdraw money through Chime. It gives customers a Visa debit card, where money is withdrawn directly from their account when purchasing the card. Chime collects an interchange fee from the merchant.
Chime also has 60,000 fee-free ATMs in the MoneyPass and Visa alliance networks. Withdrawing cash at other ATMs, call out-of-network withdrawals, and you’ll be charged $2.50 per transaction, and the ATM provider may charge an additional fee. Deposits can’t be made at any ATMs.
Better banking is here.
- No account fees
- Earn up to 4.20% APY
- Up to 2-day-early-paycheck
- No-fee Overdraft Coverage.
- Do it all in one app.
- Up to $2M of additional FDIC insurance through a network of participating banks.
Wells Fargo
If you bounced too many checks at your previous bank and have a poor ChexSystems history, you shouldn’t have to worry about bouncing checks under a second chance bank account at Wells Fargo called Clear Access Banking.
The checking account it offers doesn’t come with check-writing abilities, and there are no overdraft fees if a balance drops below $0. There are no overdraft fees because the bank doesn’t allow transactions to be processed if you don’t have enough money in your account to cover them.
But with plenty of branches and ATMs that customers can visit in person, the Wells Fargo second chance checking account can be an easy way to do in-person banking. Downsides include a $10 monthly service fee, a $25 minimum balance requirement, and a minimum opening deposit. A debit card is included.
Peoples Bank
Approval for a second chance checking account at Peoples Bank is easy. It doesn’t approve applicants with fraudulent activity reported on past accounts.
It’s a basic, no-frills account. Customers get a debit MasterCard, personal checks, online bill pay, online banking options, and free online money transfers. There is no monthly service fee.
A more significant downside is its $35 overdraft fee, collected for each overdraft item presented for payment, whether paid or returned.
It offers a joint checking account, which not all second-chance bank accounts provide. A spouse or other family members can open a joint checking account together. Each person must fill out an application and supply the required documents.
The debit MasterCard can be used without paying fees at MasterCard ATMs, and Peoples Bank says there are 1 million of them globally. Use it at an ATM that isn’t in the network, and you’ll likely be charged fees.
PNC Bank
PNC Bank offers a Foundation Checking account for people who don’t qualify for a traditional checking account.
It charges a monthly service fee of $7, requires $25 to open an account and a $25 minimum balance, and charges $3 to use non-PNC Bank ATMs in the United States. PNC employees and customers 62 and older can have the monthly service charge waived.
The good news is that the account comes with a free Visa debit card, no fees at PNC Bank ATMs, and it doesn’t charge overdraft fees or returned item fees. PNC also offers free online banking, mobile banking, and digital payments from an account.
PNC recently bought BBVA, which had its second chance checking accounts. Those accounts are transferred to PNC, and any new second-chance accounts opened through the new combined bank must be opened at PNC.
As part of this bigger banking group, customers of these merged banks have access to ATMs owned by the other, all for free. All of the BBVA ATMs are being converted to PNC ATMs.
Better banking is here.
- No account fees
- Earn up to 4.20% APY
- Up to 2-day-early-paycheck
- No-fee Overdraft Coverage.
- Do it all in one app.
- Up to $2M of additional FDIC insurance through a network of participating banks.
Summary of second chance banks
Bank | Monthly fees | Branches | ATMs | ATM fees | Minimum balance |
Chime | $0 | 0 | 38,000 | $0 / $2.50 | $0 |
Wells Fargo | $5 | 5,200 | 13,000 | $0 / $2.50 | $25 |
Peoples Bank | $0 | 0 | 1 million | $0 / Unknown | $0 |
PNC Bank | $7 | 2,300 | 18,000 | $0 / $3 | $25 |
Note: Under ATM fees, the first number is for fees in the bank’s ATM network, and the second is for using a non-network ATM for that bank.
Costs
Second-chance banking is usually more expensive than a regular bank account. But this type of fresh start checking can be much cheaper than alternative banking methods that the unbanked are often left with choosing, such as check cashing stores, payday loans, and money orders.
Here are some of the cost ranges for second-chance banking, with examples of specific costs from the banks we reviewed:
Monthly fees
A monthly maintenance fee is simply a way for a bank to make you pay for using its services. Many banks with regular checking accounts either don’t charge one or waive it by using direct deposit or keeping a minimum balance.
Chime and Peoples Bank doesn’t charge a monthly fee, while the other two we reviewed charge around $5. Until your credit score or ChexSystems report improves, you may be stuck paying this fee just for having a bank account. Once your score improves, you can open a new account elsewhere or upgrade to a new account without this fee.
ATM fees
The ATM fees that second chance banks charge are what banks charge customers with regular accounts. Expect to pay nothing for using an ATM in the bank’s network, which can be at a branch office or in a broad ATM network used by other banks.
But if you use one outside the bank’s network, these fees cost $2.50 to $3. And that’s just the cost from your bank. The out-of-network ATM may also charge a similar fee.
Minimum balance
Banks without physical branches don’t often have minimum balance requirements to entice people to become customers. It’s a small concession but one that may sway some people.
Physical banks, however, often require a $25 minimum balance, or they may close your account. This may be a way to ensure you remain a customer.
Overdraft fees
Only one of the four banks we reviewed charges overdraft fees. Peoples Bank charges $35 for each overdraft for non-sufficient funds. It won’t charge the fee if your account is overdrawn by less than $5. However, if your account is overdrawn by $5 or more, the bank will charge an overdraft fee for each transaction that overdraws the account.
Peoples Bank won’t charge overdrafts if you don’t sign up for overdraft protection that pays ATM and one-time debit card transactions. Without this coverage, the merchant probably won’t approve your purchase.
Other fees
Those are the main fees to consider before opening a new account. Look at the details of any account you’re considering before opening a new account.
It should be easy to find banks that don’t charge account holders to use the bank’s ATMs, mobile banking, online banking, or for using its debit card. If it does, you should be able to find a national bank elsewhere that doesn’t charge such fees and has enough account features to benefit you.
Pros and cons
Pros
- Second chance banking allows the unbanked and underbanked to access financial services that they might not otherwise get access to or pay high fees to use.
- You’ll have access to a bank’s ATMs, which can cost a lot in fees for people who aren’t customers.
- Some second chance banks have physical branches, so you can bank in person if you want to.
- Deposits are insured by the FDIC.
Cons
- It can cost more to have a second chance bank account than a regular account. Monthly fees and minimum balance requirements are common.
- It can take a year or so to improve your credit score and up to five years for poor marks on a ChexSystems report to be removed before you can open a regular account and avoid many fees at a second chance account.
- If you’ve done any fraudulent activity on past bank accounts, you may be unlikely to open a second chance bank account.
- You may not get the perks that other accounts offer.
Better banking is here.
- No account fees
- Earn up to 4.20% APY
- Up to 2-day-early-paycheck
- No-fee Overdraft Coverage.
- Do it all in one app.
- Up to $2M of additional FDIC insurance through a network of participating banks.
FAQs
Are second chance bank accounts FDIC insured?
Yes, second chance bank accounts are typically FDIC insured, meaning your deposits are protected up to $250,000 per depositor, per bank, in the event of the bank's failure.
Do second chance banks require a credit check?
Many second chance banks do not require a credit check, but they may review your ChexSystems report, which tracks your banking history. If you have had issues like overdrafts or account closures, this may appear on your ChexSystems report.
Can I improve my banking history with a second chance account?
Yes, using a second chance account responsibly can help improve your banking history. By maintaining a positive balance, avoiding overdrafts, and managing your account well, you can rebuild your financial reputation over time.
The bottom line
Not having a checking account can be expensive. Higher fees at alternative banking sources can cost a consumer $3,000 annually.
Second-chance bank accounts can help remove some of that financial burden and give you access to a debit card, checks, and other services you might not be able to find elsewhere. The fees can be a little higher than you’d pay with a regular account, but if you raise a bad credit score, you can apply for a better account later and return to better financial health.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
Share this article
