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 to operate than the fees banks charge. Access to credit cards can also be difficult, forcing many unbanked people to use prepaid debit cards often have many fees.
Second chance banks can help the unbanked and underbanked, which total 63 million American adults, or 22% of the population, according to a 2019 report by the Federal Reserve. Six 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.
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 may be 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 or unpaid fees, or other problems at banks.
In this story, we’ll explain how second chance banks work and 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 has denied your application to open an account, then you may need a second chance bank.
An account can be closed for many reasons, including:
- 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, chances are you 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 the past five years. It checks for closed accounts, overdraft fees, fraudulent activity, and other negative information that we mentioned earlier.
A bank can decline opening an account to 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 somewhere between what you’re used to at traditional banks and credit unions and the high fees that the unbanked typically pay at check-cashing services 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, then 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
It’s worthwhile to shop for the best second chance bank accounts that fit your needs. We provide short reviews of some second chance banks below, all with an essential checking account that can make your financial life a lot easier. Online banking services are standard, including online bill pay.
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 0.50%. Neither account has a minimum deposit or balance requirements. Accounts are insured by the FDIC 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 your account when you purchase with the card. Chime collects an interchange fee from the merchant.
Chime also has 38,000 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.
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 $5 monthly service fee, a $25 minimum balance requirement, and a minimum opening deposit. A debit card is included.
Approval for a second chance checking account at Peoples Bank is easy, though it charges a $30 activation deposit to apply online. It doesn’t approve applicants who have had 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. The monthly service fee is $4.95.
A more significant downside is its $37 overdraft fee, collected for each overdraft item presented for payment, whether it’s 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, which Peoples Bank says there are 1 million of them across the globe. Use it at an ATM that isn’t in the network, and you’ll likely be charged fees.
offers a Foundation Checking account for people who don’t qualify for a traditional checking account.
It charges a monthly service fee of $5, 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.
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||$4.95||0||1 million||$0 / Unknown||$0|
|PNC Bank||$5||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.
Second chance banking is usually more expensive than a regular bank account. But this type of fresh start checking can be a lot cheaper than using 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:
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 doesn’t charge a monthly fee, while the other three 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.
The ATM fees that second chance banks charge are about 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 of 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.
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.
Only one of the four banks we reviewed charges overdraft fees. Peoples Bank charges $37 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 for overdrafts if you don’t sign up for overdraft protection that pays ATM and one-time debit card transactions. Without this coverage, your purchase probably won’t be approved by the merchant.
Those are the main fees to look out for 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
- 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.
- 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.
The bottom line
Not having a checking account can be expensive. Higher fees at alternative banking sources can cost a consumer $3,000 per year.
Second chance bank accounts can help take some of that financial burden away 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 in time if you raise a bad credit score, you can apply for a better account later and be back on the road to better financial health.