What is a Second Chance Online Checking Account?

A bank might have shut down your checking account or not have allowed you to open one. There are a number of reasons why.

The bank itself might have decided, based on its own policies and procedures, that you have mishandled the account. For example, you had more overdrafts than it considers prudent. In addition, you may not have paid off what’s still due. Another reason why you are denied a checking account could be that the bank reviewed your account history with ChexSystems. Just as FICO assesses credit-worthiness, ChexSystems maintains a database of 300 million checking accounts, flagging those with patterns of financial carelessness. That information remains on record for five years. Anyone can request a free ChexSystems report annually. If there are errors, you can notify ChexSystems to correct them.

In some situations such as bankruptcy and fraud, the story stops there. It will be impossible to obtain a checking account, at least for several years. Where there were overdrafts and the money has been paid back, some banks offer what is generically called “second chance” online checking accounts. Since they are high risk, the bank only provides them online. That reduces the cost to the bank, which lowers its level of risk. Each financial institution might have its own specific name for second chance checking such as “Opportunity Checking.” Essentially, this option has many of the features of conventional checking but with additional terms and conditions. Those vary from bank to bank. That’s why you have to shop carefully, asking very specific questions:

  • Is a course in money management required? Are you willing to take the course?
  • Is there a minimum deposit, how much and must that amount be retained? If so, what is the penalty for falling below that level?
  • Is there a monthly maintenance fee and how much? Can that be waived if you keep a certain balance or deposit a certain amount each month? Also, can the fee be waived if you have other accounts at the bank such as savings and debit?
  • Can overdraft protection be purchased? If not, what is the fee and penalty for an overdraft? Is there a limit on the number of overdrafts?
  • What are the free services, such as ATM access, e-statements, and a debit card?
  • Is there a fee for check-writing and any limit on the number of checks?
  • Are the funds NCUA insured, up to $250,000?
  • After a year or two, if your use of that second chance demonstrates financial responsibility, can you be upgraded to a regular account, which usually means with lower fees and options such as interest paid?

At this time, second chance checking is still not a mainstream service in banking. Therefore, you will have to dig around to find which banks offer it. You can start on the Internet, keying in “second chance checking.” You can stop in and talk to bankers in your neighborhood or those you did business with before, such as taking out a mortgage or purchasing a CD. You can ask around your network. That’s only part of your search. The next part is posing those questions to each bank you approach.

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