Second chance checking accounts are designed for those with bad credit and a history of poor performance with traditional accounts. They require proof of income and creditworthiness, and often have minimum balance requirements and fees. They can be useful for repairing credit, but critics argue that penalties can be harmful. Proponents say they provide a much-needed avenue for rehabilitation. They work like regular checking accounts, with account numbers, routing numbers, and checkbooks, and some banks offer similar benefits to sub-account holders.
A second chance checking account is a type of checking account designed for those with bad credit and a history of performing extremely poorly with traditional checking accounts. Second chance checking account providers often require more rigorous proof of income and creditworthiness before opening such an account, as well as maintaining a minimum balance. Often, those in need of a second checking account chance are those listed on ChexSystems, a directory of people with a history of bad checks or continuously outstanding accounts.
From the account holder’s perspective, a second chance checking account can be useful both for writing and cashing checks and for repairing one’s credit rating. A history of bad checks can be detrimental to a person’s ability to navigate everyday life, and second chance accounts provide an avenue to rehabilitation. rehabilitation, however, can come at a price.
Banks that offer second-chance checking accounts do so because such accounts allow them to offer vital services to a segment of the population that has no other alternative. Banks charge annual, semi-annual or monthly fees for maintaining such accounts. They can also require account holders to maintain a minimum checking account balance and impose substantial fees or penalties for balances that fall below the predetermined minimum.
Such penalties, critics argue, can be harmful to those who have already demonstrated poor performance with personal finances. Proponents argue that second chance checking accounts provide a much-needed avenue for account holders with poor credit and banking performance to rehabilitate their financial records. Proponents also cite tougher penalties instituted by banks for second chance accounts as a key factor in helping account holders straighten out their day-to-day financial habits.
On a practical level, a second chance checking account works – apart from penalties and restrictions – not unlike a regular checking account. An account holder still possesses an account number, routing number, and checkbook with checks that are honored like those of traditional checking accounts. A second chance account holder should also balance their checkbook at regular intervals to ensure account stability and optimal performance. Some banks also offer similar benefits, such as check cards and fee waivers for electronic direct deposits credited at regular intervals, to sub-account holders just as they do to traditional account holders.
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