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The Risks and Benefits of Second Chance Banking

Checking accounts seem to be a fact of life in the modern age. It is difficult to get certain types of credit without an established checking account, and it is more difficult to pay normal bills without one as well. However, if a person has had problems with their checking accounts before it may be difficult for him or her to get access to a checking account. This is where second chance banking may be helpful. Second chance banking accounts are offered for consumers that have had issues with bank accounts in the past so that they can still have a checking account.

ChexSystems

ChexSystems is a company that keeps track of consumer’s negative checking account history. For example, if you have a checking account closed due to excessive overdrafts or because it was left with a negative balance for too long, you will likely be reported to ChexSystems. Then, if you attempt to open a checking account (and sometimes even a savings account) with another bank, they will likely pull your ChexSystems report and quite possibly deny you the account because of your account history. This history will stay on your account for seven years, so it is not something to be taken lightly.

Second Chance Banking Benefits

Second chance banking accounts offer consumers that have had troubles with their accounts before the opportunity to get another checking account. These types of banking companies will generally advertise that they do not check your ChexSystems report and many will also not check your credit reports either. This type of account offers consumers that have made mistakes with their banking accounts in the past the opportunity to get the same benefits from a checking account that others enjoy.

Second Chance Banking Drawbacks

There are several possible drawbacks to using a second chance banking account, many of which vary by the bank. One drawback is that many of these types of accounts will allow require that your paycheck be direct deposited into your checking account, which can be impossible for some individuals who work for companies that do not offer this service. A second drawback is that many of these accounts do not allow the accountholder to write checks. Instead they only allow the use of a debit card; this can cost the customer a significant amount in fees if the bank does not have many ATM (automatic teller machines) in the area.

Another drawback to this type of account is that many second chance banking account provides may require a fee to open the account, this fee can be in excess of $75. That type of requirement should be carefully examined by any individual considering this type of account as it leaves open the possibility of fraud.