Second chance checking accounts are designed for those with bad credit and a poor track record with traditional checking accounts. They require proof of income and a minimum balance, and often cater to those listed on ChexSystems. While they can help repair credit, they come with fees and penalties for falling below the minimum balance. Advocates argue they provide a necessary avenue for rehabilitation.
A second chance checking account is a type of checking account designed for those with bad credit and an extremely poor track record with traditional checking accounts. Second-chance checking account providers often require more rigorous proof of income and reliability before opening such an account, as well as maintenance of a minimum balance. Often those in need of a second chance checking account are those listed on ChexSystems, a directory of people with a history of bounced checks or ongoing overdrafts from their accounts.
From the account holder’s perspective, a second chance checking account can be useful for both writing and cashing checks and repairing your credit rating. A bad check history can be detrimental to a person’s ability to navigate everyday life, and second chance accounts provide an avenue for rehabilitation. However, rehabilitation 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 detrimental to those who have already shown poor performance with personal finance. Advocates 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. Advocates also cite the tougher penalties instituted by banks for second-chance accounts as a key factor in helping account holders straighten out their everyday financial habits.
On a practical level, a second chance checking account operates, aside from the penalties and restrictions, no different than a regular checking account. An account holder still has an account number, routing number, and checkbook with checks that are honored like traditional checking accounts. A second chance account holder should also balance their checkbook at regular intervals to ensure optimal account performance and stability. Some banks even offer similar benefits, such as checking cards and fee waivers for electronic direct deposits credited at regular intervals, to second chance account holders just as they do to traditional account holders.
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