Second Chance Banking – A Guide

second chance banking

CNBC estimates that 25% of American families are either underbanked or unbanked. One reason for this is that people may struggle to get approval for a new bank account after making banking mistakes. This may include bounced checks or even fraud. Second chance banking is a nationwide opportunity to rebuild a more favorable banking history.

What Are the Benefits of Second Chance Banking?

The advantages of opening a second chance bank account come down to the benefits of getting back into the banking system. However, it also has advantages over other options, such as cashing checks.


Traditional bank accounts are not accessible to everyone, but second chance accounts usually are. If the bank offers traditional accounts, it may also provide the option for you to upgrade within a year or so.


Having a bank account makes money management so much easier. With second chance banking, you now have an account to pay for goods and services online and make faster payments in stores.


If you rely on check-cashing services in place of a bank account, the costs add up. Fees are often so high that some states set a limit on how much companies can charge. Experian estimates a cost range of $1 to $8 per check.


If you have started to earn or save more money, you need to protect it. Most banks provide FDIC insurance up to $250,000. So, even if the bank fails, you are guaranteed to get your money back.

Who Would Use Second Chance Banking?

The most obvious users of second chance banking opportunities are people who are underbanked or unbanked and wish to change this. Who are the people who tend to fall into this category?

Released Persons

When serving time in jail or prison for several months or more, it is not uncommon for people to leave accounts open. During this time, accounts may become inactive. Fees may pile up and the accounts may go into overdraft.

Lower-Income Families

CNBC reports that half of the people who are unbanked do not have enough money to keep an account open. It also found that banks were closing at higher rates in lower-income areas, which contributed to them becoming an inconvenient option for many families.

Bankruptcy Filers

When recovering from bankruptcy, most people focus on rebuilding their credit histories. This is an important step, but banking histories may have also taken hits during that time and may also need some rebuilding.

When Should You Consider Second Chance Banking?

People who have been unbanked or unbanked for some time learn to adapt. Some have no intention at all to change their status. So, when is it worth considering second chance banking?

Job Opportunities

If you want to expand the opportunities you have to build your career, you need a bank account. Employers may have a legal right to make owning a bank account a criterion for working with them. Federal law only prevents them from forcing you to choose a specific bank.


If you intend to marry soon or have recently married, your finances become a much bigger focus because it now affects your spouse. Your spouse may also want to share a joint bank account. Second chance banking can help make this possible.

Big Purchases

Are you planning to buy a car or house in the near future? You may need to fix your banking history before you can qualify for a loan. Lenders may think twice about offering a loan to someone with a poor banking history. It is also a first step toward improving your credit score.

Examples of Second Chance Banking

There are many great companies offering second chance opportunities for people looking to open accounts. Some banks operate more locally, while others offer accounts nationwide. These are recommended by NerdWallet:

  1. Clear Access Banking by Wells Fargo
  2. Essential Checking by Radius Bank
  3. GoBank by Green Dot Bank
  4. Spending Account by Chime
  5. Bank Account by Varo

Steps for Opening a Second Chance Banking Account

How you apply for a second chance account depends on the bank and the type of account. Most second chance accounts are checking accounts, but some banks offer savings accounts as well. These are some steps that tend to overlap, regardless of your choices:

  1. Do some research to determine what bank account and bank is right for you.
  2. Check the bank’s website, give them a call or visit the bank to determine what you need to apply.
  3. Gather all the information required.
  4. Submit your application.
  5. If approved, practice good money management to increase the likelihood of upgrading to a regular account.

Quick Questions

How does a bank know of my prior banking history?

Banks may release information about your banking history to a ChexSystems list. When applying for a new bank account, most banks check this list for derogatory remarks.

Are there any limitations on second chance accounts?

Unfortunately, second chance banking accounts don’t always work the same way regular accounts do. Bankrate reports that the following limitations are common:

  • Mandatory account fees
  • Limits on debit card spending
  • No overdraft protection
  • Restrictions on person-to-person payments
  • Direct deposit requirements
  • Completion of short courses on money management

Can second chance banking help me rebuild my credit?

Rebuilding your banking history may not have an immediate effect on your credit score. Still, the bank that offers you a second chance account may feel more inclined to provide you with a credit account to rebuild your credit history in the near future.

The Bottom Line

Second chance banking provides a lifeline back into the banking world when conventional approval methods fail. However, consumers should look to upgrade to regular bank accounts as soon as possible to avoid the restrictions of second chance banking. Good money management plays a big role in making this possible. Check our blog for money management and banking advice.

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