If your banking history prevents you from opening a bank account, a second chance banking account could be key to getting you back on a strong financial footing. But what is second chance banking, and how do second chance banking accounts work?

In this article, we'll cover what you need to know about this type of bank account so you can decide if one could be a good solution for you.

Defining Second Chance Banking

Second chance bank accounts are designed for individuals whose banking history prevents them from opening a regular checking account. This may include individuals who have been denied an account due to too many overdrafts or unpaid fees. 

How Second Chance Banking Works

Typically, when someone applies for a new checking account, the bank runs a check on them using ChexSystems. ChexSystems is a consumer verification and reporting service that collects data about individuals' banking histories, similar to credit reporting agencies[1].

Certain negative banking incidents like repeat history of writing bad checks, involuntary account closures, or too many overdrafts may lead to a negative ChexSystems score. This could prevent individuals from opening checking accounts, considering them to be too much of a financial risk to become a customer.

For second chance bank accounts, issuers choose not to check a customer's ChexSystems score or are willing to forgive a negative report. Although these accounts may not include all of the services and features that typical bank accounts offer, they offer customers many of the important services of traditional accounts. They can also give individuals with low ChexSystems scores a chance to rebuild their banking histories.

The Benefits Of Second Chance Banking

If you're unable to open a traditional bank account, there are many reasons why applying for a second chance banking account may be beneficial.

Get Access To Important Bank Features and Services

Second chance banking can allow individuals to use some of the most important features and services of a traditional checking account. For example, a second chance account may allow users to access a debit card for making purchases and completing transactions at an automated teller machine (ATM). It may also grant users access to a checkbook for paying bills and other obligations. Second chance bank systems also make it possible for individuals to receive direct deposit paychecks from employers. It also means account holders have the ability to use a mobile banking app and all of the features that come with it — including access to the Zelle® payment system, automatic bill pay services, etc.

Keep Your Money Safe

Second chance bank accounts also allow users to store money with banks protected by the Federal Deposit Insurance Corporation (FDIC). The FDIC protects amounts deposited in qualifying accounts up to the maximum limits[2]. Having your money insured by the federal government is far safer than keeping all of your funds as cash at home.

Rebuild Your Bank History

If you open a second chance bank account and use it responsibly — avoiding overdrafts, paying fees on time, etc. — you may help rebuild your ChexSystems score.

In fact, after demonstrating responsible use of a second chance bank account, your bank may allow you to open a regular checking and/or savings account.

It's worth noting that negative ChexSystems marks stay on your consumer report for five years[3]. By opening and maintaining a second chance bank account, it’s possible to improve your negative ChexSystems score within a shorter period of time.

However, it's important to understand that second chance bank accounts do not help individuals improve their credit scores, as reported by Equifax, Experian, and TransUnion.

Save Money 

By using a second chance bank account, it’s possible to avoid dependence on a check-cashing service for accessing your income. Check-cashing services usually charge exorbitant fees that eat into your hard-earned money.

In addition, when you have a checking account through a bank or credit union, you are able to pay bills without having to purchase money orders — which can also rack up high fees.

Potential Drawbacks and Considerations

Of course, there are some downsides to using a second chance bank account.

Limited Features and Services

Not all second chance bank accounts may offer the same services found in traditional checking accounts. For example, a second chance account may not grant users access to a book of paper personal checks. Or the account may limit the number of transactions the account holder can make with their account’s debit card.

In addition, many second chance bank accounts don't allow holders to enroll in the bank's overdraft protection program. After all, one major reason for opening a second chance account is to prove that you can avoid overdrawing on your account in the first place.

Fees and Requirements

Many second chance bank accounts come with monthly fees or service charges. Depending on the provider, these charges may or may not be waived. In addition, the second chance account may come with certain financial requirements — such as a regular direct deposit, a minimum deposit or balance, etc. When determining which second chance bank account to apply for, it pays to read all of the bank's fine print to ensure you're aware of any extra fees or requirements.

What to Look For In A Second Chance Bank Account

Before applying for a second chance bank account, there are several considerations to keep in mind.

Online Only or Brick-and-Mortar Bank?

Thanks to the Internet Age, many newer banks are 100% online. These banks do not have physical locations where you can speak with a teller or branch manager or make cash deposits. While some online only banks offer second chance bank accounts, many may not offer the full array of banking services available at a traditional brick-and-mortar bank.

Fees and Requirements

As mentioned previously, many second chance accounts involve monthly fees or service charges. When choosing an account, be sure to review all of the bank's policies. You could save money by opting for an account with lower fees.


Again, some second chance accounts may lack the features that typically come with a traditional checking account. Before opening an account, ensure it includes all of the features you require — for example, mobile banking or the use of a checkbook.

Bank On Certification

Bank On is a program by the Cities for Financial Empowerment (CFE) Fund that encourages banks and credit unions to offer safe, low-cost accounts for unbanked consumers. The Bank On program certifies accounts that meet certain standards, such as:

  • Non-waivable monthly fees of $5 or less, if the monthly maintenance fee isn't waivable
  • If the monthly maintenance fee is waivable, it will be $10 or less; fees must be waivable by at least two methods
  • Minimum opening deposits of $25 or less
  • No overdraft fees
  • No extra fees for opening or closing the account, keeping a low balance, or inactivity
  • No fees for in-network ATM use[4]

PNC Bank offers a second chance bank account, Foundation Checking, that meets all of these criteria and is certified by Bank On.

Alternatives to Second Chance Banking

If you need to pay your bills and make purchases but don't qualify for a traditional bank account, there are a few alternatives to a second chance account or relying only on cash.

One option is a prepaid debit card. These cards can be used for transactions online and at brick-and-mortar retailers, just the same as a "regular" debit card. However, they're not connected to checking or savings accounts. Instead, you can fund these cards with cash at the time of purchasing them from a participating retailer or bank. Once you've spent all of the funds you've preloaded the card with, you can refill the card with more money.

A big downside to prepaid debit cards is their potential for steep fees. These cards often charge monthly maintenance fees, as well as transaction fees, ATM fees, reload fees, and balance inquiry fees. Typically, these fees are automatically withdrawn from your card balance[5].

Another option is to purchase money orders to pay your bills. Fees for money orders typically vary depending on the dollar amount but can add up over time. In addition, some money order issuers, such as the United States Postal Service (USPS), limit the amount you can include in a single money order[6].

The Bottom Line

If you're one of the millions of Americans who are unbanked — that is, without the benefits of a checking or savings account — you may be missing out on convenient features, as well as services that can help you save money on money-order fees. If your banking past is preventing you from opening a traditional account, opting for a second chance bank account could help you access some of the benefits of a bank while also helping you rebuild your history.