Second-chance checking accounts are alternative checking accounts offered to people who cannot open a traditional checking account because of past financial mismanagement. This type of account typically comes with higher fees and use restrictions, explains CNN Money.
Most banks use ChexSystems, a credit-reporting agency and check verification service, to determine if a person trying to open a new checking account has a history of writing bad checks or overdrawing accounts without paying the money back, notes Bankrate. Once a consumer lands in the ChexSystems database, it may be impossible for the person to open a regular checking account at any bank that uses ChexSystems for a five-year reporting period.
Some banks give potential customers a second chance to demonstrate they can manage a checking account responsibly. Each bank that offers second-chance checking accounts has its own qualifications and requirements, explains CNN Money. Some banks require the customer to have paid off any money reflected as owed on ChexSystem to qualify for a second-chance account, while other banks require the customer to take a money-management course before opening the account. Banks offering these accounts typically prevent the account from using traditional checking account perks, such as overdraft protection. Some banks transition the second-chance account into a regular checking account or lift some of the restrictions if the customer manages the account responsibly for a period of time.