Have you ever tried to open a bank account and found you’ve been turned down? Not for a credit card, but a simple deposit and transaction account. If you have a poor credit history, you’ve had a lot of overdraft fees in the past, maybe bounced some checks, this can lead to banks rejecting your application for a bank account.

Just like trying to open a credit card when you have a poor credit history, you need a product that will help you rebuild your reputation, as well as to allow you to continue with your day to day banking. This is where Second Chance bank accounts come in.

Downsides to Second Chance Bank Accounts

Before looking at the positives, it’s important to know there are some downsides to Second Chance bank accounts. They generally have a minimum opening balance, though nothing particularly large, $25 – $50 is average. They also have much higher fees than many accounts, ranging from $10 set up fees, to $10 – $20 monthly maintenance fees, an early account closing fee and even ‘dormant’ account fees if you forget to close the account after it has served its purpose.

Purpose of a Second Chance Bank Account

While Second Chance bank accounts may come with higher fees and stricter conditions, they do not do any background checks before allowing you to open the account. While most accounts use ChexSystems to screen applicants, Second Chance accounts don’t. This means if you’ve recently been turned down for a regular account, Second Chance accounts give you a chance to rebuild your banking reputation, just like Secured Credit Cards give you a chance to rebuild your credit score.

It’s important when using these accounts to avoid any overdraft fees, excess withdrawal fees or stop payment fees. If you do incur these fees, make sure you pay them promptly. The better your financial ‘behaviour’ is while using a Second Chance bank account, the quicker you will be able to switch to a fee free account and keep your money in your pocket, not in the banks.

Finding a Second Chance Bank Account

Finding a Second Chance bank account that suits your needs can be tricky, because they are not often offered by the major banks. While these accounts come with extra fees compared to the usual accounts, banks typically make less money from them because they have smaller account balances. The major retail banks are often unwilling to deal with this kind of account because the risks outweigh the benefits.

Instead, you can usually find a second chance account with your local bank, or a credit union. Because these are smaller business they are more willing to take risks to get your business, and have greater flexibility when dealing with unusual circumstances.

While a Second Chance account may not be the best deal, it is a useful product for rebuilding your banking reputation and getting you back on your feet. Most people who use a Second Chance account are about to ‘graduate’ to a regular bank account within a couple of years even if they still have a black mark in ChexSystems. While you might not be able to open a regular account with a different bank, many banks and credit unions will ‘upgrade’ your account to a regular one. If you’ve been using a Second Chance account for a couple of years, it can’t hurt to ask.