Second Chance Checking Accounts

[Feb 19, 2009.]

 

The banking system cracks down hard on people who abuse checking accounts. They put you in the dreaded "Chex Systems," which tells all the banks that you are not someone who should be granted a checking account, because you're only going to abuse it. Maybe you did write some bad checks at some point or otherwise damage your credit with the financial crowd. But maybe you were young then, or dumb, or both, and you've changed. If so, the banking industry has developed a product for you called second chance checking.

Second Chance Checking Accounts, In Short

Second chance checking is one of those products that pretty well is what it says it is: a second chance to have a checking account. It's basically a checking account for people with bad credit. Simple, right? But pay attention to the details, especially the fees.

Why They're Worth It

Many people without checking accounts have to pay exorbitant fees every time they conduct a banking transaction. You cash your paycheck, you pay 5% to a check cashing outfit. You pay your rent, you pay $5 for a money order. You pay your utility bills, you buy three money orders and a book of stamps. Who'd have thought that paying "in cash" could be so expensive?

Responsible use of a second chance checking account can allow you to start building up a positive credit history. If you can show that you have kept this account open and functioning fine for six months, you are much more qualified to receive a credit card, for example.

In fact, the hope that you will become a customer of other bank product offerings is the number one reason the banks offer this "welcome back" in the first place. It's a win-win, as long as you act responsibly.

But It Costs More

The main problem with these accounts is that they're more expensive than regular checking accounts. Forget about signs that advertise "free checking" and accept that you will have to pay an upfront fee to start an account, ranging anywhere from $25 to $150.

Depending on the bank and how troubled your credit history actually is, you may also have to pay an additional regular fee to maintain the account, usually around $10 per month. If you always have a low balance, that little fee can eat into your funds quite a bit. Checking accounts for people with bad credit cost a little more.

Get Regular ASAP

After you've responsibly maintained a second chance checking account for a while, consider asking your bank to give you a regular checking account, with lower fees. If they are not willing to do that, consider applying at another bank. If you can show hard proof that you won't abuse the system, the banks will eventually let you back into it. And why not? They need the checking customers.

One of the web sites that can be a useful resource for comparing rates not just on checking accounts but also on Certificates of Deposit, Money Market Accounts and Savings Accounts is MoneyRates.com.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.