Checking accounts for bad credit is one of the many ways that you can improve your bad credit score. One thing that you’ve got to be wary of is that these second-chance accounts won’t eliminate your previous bad score; only time can do that.
Yet, they’ll start improving your future score to balance out your overall banking image. So, let’s get to know more about these accounts. What do they do for you? What won’t you be able to do when you have one of them? Why are they such a popular choice nowadays?
What Is Bad Credit?
Lousy credit can easily happen to anyone as it takes on a snowballing form before it hits you in the face when you are declined a particular banking service. The thing is, a bad credit score happens through actions that we do daily without thinking, and it leads to us not being able to get a banking account, a credit card, pay with a check, etc.
So, one of the many things that can lead you to have a bad credit score is having bouncing checks, and bouncing checks don’t always mean that you were at fault; they could easily be the result of some technical error. On the other hand, we’ve got checks with no balance, and these are definitely your fault. Either way, both actions lead to bad credit.
Moreover, struggling with one massive bulk of a single debt, whether it’s a student loan, mortgage, or car loan, will show the bank that you’re incapable of paying one loan, so how can they trust you with others?
Other actions that lead to a bad credit score include overspending beyond your credit limit and missing the payback dates. Additionally, drawing more than the ATM’s maximum limit per day more than once and having more than one unpaid bill on your card for a long time could be the reasons why your credit score is decreasing.
All of the mentioned events will lead to a loss of trust between you and the known mainstream banks. Hence, when you apply for a bank account to get a debit card and enjoy all of the advantages of this account, you’ll most probably be refused. The bank simply can’t trust you to make wise transactions and pay back all that is due on time.
What Are Checking Accounts for Bad Credit?
Now that we’ve run out of options in regards to the well-known mainstream banks that offer the entire package of services for specific fees, we’ve got to start looking elsewhere for banking places that won’t turn their backs on you due to your bad credit score.
These places are also banks, but they offer a certain type of accounts known as second-chance accounts. They’re pretty specific when it comes to what they need from you and what they can provide you with.
The most important thing is that although they do check on you and how your previous banking life has been – your transactions, checks, etc. – through different observers, such as ChexSystems EWS and TellyCheck, the acceptance percentage in these banks is around 95%.
They hardly put any bounds on you. Mostly, you’ll have to pay a monthly fee; then, you’re free to use your banking account as you wish.
Another significant aspect of these second-chance accounts is that they give you the chance to rebuild your credit score, allowing you to wisely manage your spending, prioritize your expenditure, and create a much better banking image for yourself while still being able to pay your bills in a timely manner.
Advantages of Checking Accounts for Bad Credit
There are so many incredible advantages to choosing banks that require no credit check to open an account when compared with other options, such as prepaid debit cards and just paying in cash constantly. Here are a few of them:
Very Little Fees
The thing about second-chance banking accounts is that they know you’re in no state to afford any extra expenses. So, they keep that point in mind when deciding on the monthly fees required to keep your second-chance banking account open.
You’ll find that most of the banks that offer this service have their fees kept to a minimum to induce people to commit to this account. Furthermore, the competition is incredibly fierce between second-chance banking accounts, so you’ll find that the more you look, the more satisfied you’ll be with the monthly fees that you’re seeing.
Another advantage to this kind of banking account is that there are no other fees and no hidden expenses that you’ll be surprised with when a letter from the bank reaches your house.
You don’t have to pay for a checkbook or ten different cards. Mostly, just a debit card, and some banks even offer that for free. The same goes for the checkbooks. They can be optional for you if you need them, or you can just forgo the whole thing if you don’t care much for checks in the first place.
Moving on, the time that you spend with your second-chance banking account can extend for as long as you need it to. You’ll only be covering your basic expenses from it and making wise decisions in regards to your spending in other areas.
As a result, you’re given the opportunity to repair your bad credit score and fix your relationship with your original bank or even other banks.
The score observers or banking bureaus mostly keep your transactions and credit actions for around five years. So, if you keep your second-chance banking account and stick to it for these five years, you’ll be able to start on a clean slate with other banks and enjoy further features from mainstream banking facilities.
The most important thing is to keep your current slate with a second-chance banking account as clean and shiny as possible. Don’t miss any due dates, try to wrap up as many of your loans as you can, pay your bills on time, don’t exceed your limits, and try to add to your bank account way more than you’re taking from it per month.
When you’ve reached a stage of needing to close down your original bank account, you must reconsider your life choices in regards to expenses. Almost everyone has loans; mortgage, student loans, or even car loans, but not everyone ends up with a second-chance bank account or even a prepaid debit card.
You must be doing something wrong somewhere if the result of your actions is that you had to take a step back from your original bank. Subsequently, what you’ve got to do is start planning your monthly expenses.
You can use a planner or even an Excel sheet to differentiate between the main expenses, such as bills, groceries, medication, loans, and other less important expenditures, like dining out, coffee, and unnecessary travels. All of these might seem inconsequential, yet they can easily snowball into an unending vicious circle of money lost down the drain.
Being in that spot and starting on a clean slate with your second-chance banking account is bound to make you do that because otherwise, there is no point in you trying again. Although second-chance banking accounts offer you a lot of advantages, they make you see the results of your actions and nudge you to make the needed changes to your lifestyle.
No Minimum Balance Requirements
It’s pretty logical that if your credit score is terrible and the bank is unwilling to open an account for you that you don’t have that much money, to begin with. Your bad credit score must have destroyed all of the finances that you’ve had.
Second-chance banking accounts don’t care about that. You don’t need a minimum balance to start your account, any kind of money that you have will be invested in your second-chance account, and you can start from there, which is an excellent incentive for people to pick themselves up and start again.
If there was a minimum balance, then the second-chance bank account wouldn’t be so different from the standard accounts, and so many people would be discouraged from trying.
This doesn’t go for all second-chance banking accounts, but some of them don’t just help you with your bad credit score; they actually offer some free advantages and perks along with their banking services.
For instance, they can offer you cashback on some of your favorite stores or even some cash back rewards if you deal with certain facilities or spend a certain amount of money. Moreover, ATM reimbursements are a known advantage amongst second-chance banking accounts.
You might think that these facilities are losing on purpose by offering all of these advantages for the minimal monthly fee that they collect per person. But, the thing is, they don’t see it that way.
As we’ve said before, the competition is fierce between these facilities. So, they’ve got to offer as many inducements as they can to draw customers to their services. When they offer such awards, they’re bound to get doubles and doubles of their normal customer count, which is what any business would want.
Just like everything else in the world, banking has migrated to the online world. Most banks offer online banking today so that their clients can open bank account online with bad credit and perform their transactions from the comfort of their homes or anywhere else.
You don’t need to wake up early, go to the bank, and stand in the queue in order to finish a certain transaction, which is absolutely splendid. The more advanced this service becomes, the happier the clients are, because who wants to do that tedious bank visit anymore.
The great thing about second chance banking accounts is that most of them offer access to mobile banking so that you can control your assets from wherever you are situated right now.
Checks are a safe way of performing transactions. Mostly individuals don’t use checks, as they’re reserved for bigger transactions related to business dealings. So, checks are in huge demand with second-chance bank accounts.
Business people mostly face tons of hurdles in the business world, and one of these can easily be bad credit, which would have them resort to second-chance banking accounts. That’s why these banking facilities had to please their clients and offer them access to checkbooks that could be with an extra fee that they would have to pay.
It’ll still be a small fee, or it could be one of the free perks that they offer with their services. Hence, if checks are an important part of your life, don’t forget to ask about their availability when you’re discussing your account with the second-chance banking facility, as they might or might not be available.
Last but certainly not least, when you open a second-chance banking account, you’ll be given a debit card in order to handle all of your transactions. Plus, you’ll create a four-digit PIN just like any debit card so that you can use ATMs, get your rewards, cashback, ATM reimbursement, and purchase anything that you need from any store.
You don’t have to think about the second-chance bank account extra fees for them as they’ll be included in the monthly fee that you’ll pay. As a result, you won’t be burdened with any additional expenditures for something that is usually the main aspect of your banking experience as a whole.
Disadvantages of Checking Accounts for Bad Credit
Just like any other service or product in the whole world, second-chance banking accounts have their disadvantages as well as their advantages. We’ll discuss them right now so that you’re wary of all of the aspects involved with having a second-chance banking account.
Nevertheless, we’d like to stress that these disadvantages are in no way extreme or pressuring to anyone who’s faced with the problems of bad credit.
These disadvantages aren’t things that would reduce the quality of your life in any way, but they mostly represent the absence of the luxurious features offered by mainstream banks.
This will show you the difference between bad and good credit scores and motivate you to improve your standing with the standard bank. Hence, you can get back to enjoying these advantages once again.
Absence of Overdraft Protection
As you know, all mainstream banks have overdraft protection so that you can spend more than what you actually have. Mostly you’ll have till the end of the month to add funds to your bank to neutralize the overdraft.
With every account you sign up for, your overdraft limit is changed, increased, or decreased, and you agree to that with the bank when you’re signing the contract for your bank account. This is essentially what credit cards do as well.
Now, when you’re dealing with a second-chance banking account, that isn’t an option. First of all, the bank can’t cover such expenses from the monthly fee that you’re paying. So, there’s no way of them getting back the money that you owe them.
Another thing is that the second-chance bank accounts are there to have you cut down on and eliminate useless expenditures. So, giving you an overdraft will do the exact opposite of that. It’ll induce you to spend more and more as you have the liberty to do that.
Doesn’t Eliminate Bad Credit
As long as you’re making conscious, wise decisions in regards to your finances with the second-chance banking account, you’ll be building a better credit score. Nevertheless, that won’t eliminate the bad credit score that you’ve had before. Only time can do that in addition to a few other methods.
Still, second-chance banking accounts have nothing to do with your old credit score; they won’t remove or improve it in any way. As long as you’re abiding by the rules of second-chance banking accounts, you’ll start adding a good credit score, which will begin to balance out the overall shape of your banking style and experience.
Money Management Course
Another not-so-fun element of signing up for a second-chance bank account is having to undertake a money management course, which is a requirement by so many banks that offer the service.
In all honesty, they want to make sure that you’re fully prepared to do what it takes to improve your credit score, as they don’t want to be wasting their time and resources.
In the end, you’ll notice that with second-chance bank accounts, you’ve got fewer options and advantages than mainstream banking accounts, and that’s a pretty logical result. These facilities don’t charge you nearly half as the mainstream banks do.
As a result, they don’t have the resources to give you such great advantages, as we mentioned before. Even checkbooks are mostly an extra feature that you’ll have to ask and pay for if you need them for your business life.
Also, there will be no credit cards and no bonus points, just some awards to keep the ball rolling and gain the upper hand in the fierce competition of the second-chance banks.
Examples of No-Credit-Check Checking Accounts
The BBVA bank is genuinely one of the pioneers of second-chance banking accounts. It has been in the business for so long, and it knows exactly what customers need. As a result, it strives to provide them with the whole package. Hence, it gives its clients unlimited checks so that they can carry on with their business transactions as they wish.
The most crucial aspect of this bank is the fact that it’s an FDIC member. Subsequently, it’s completely trustable; there’s nothing going on behind your back here.
Furthermore, after one year, you can totally upgrade to a normal banking account if you wish to enjoy all of its advantages. Additionally, it provides you with a free debit card, cashback, rewards, and free money transferred through different applications, such as Venmo and PayPal.
The opening fee for all of this is only $25, but if you’re stationed anywhere in Alaska or Hawaii, you’ll have to steer clear of this bank, as it doesn’t offer its services in these states.
- Unlimited checks
- 25$ opening fee
- FDIC member
- 13$ monthly fee
- Online and mobile banking
- Free debit card
- Free money transfer
- 38$ insufficient credit fee
- 15$ item returned fee
- Unavailable in Alaska and Hawaii
2. Wells Fargo
Our next bank is the Wells Fargo bank, and this bank has taken the level of some of its services up a few notches. It offers overdraft protection for a certain fee in order to give its clients some peace of mind that they are protected and that the bank has got their backs if they need it for any emergency.
Moreover, it has over 13,000 ATMs all over the USA and 24/7 customer service that you can reach easily. Additionally, it doesn’t have an insufficient funds fee. So, if you’re ever in that predicament, you don’t have to worry about paying the bank after you pay whoever that you were indebted to.
Furthermore, you get a free visa debit card in addition to some budgeting and spending tools that will help you regulate your expenses and understand how to spend in a better way. Still, the opening fee might be a bit too much for some people as it is $25.
- Overdraft protection for a fee
- 13,000+ ATMs
- No insufficient funds fee
- Online transfers
- 24/7 customer service
- Budgeting and spending tools
- Visa debit card included
- 25$ opening fee
We’ll move onto Chime Bank, which has also thought about the overdraft issue as it’s apparently a repetitive one with so many clients. This bank doesn’t just eliminate the fee; it actually allows overdrafts up to $200, in addition to a no-charge international transfer. That way, you can move your money around as much as you want without paying extra.
Furthermore, it requires no minimum balance at all, and you get a free visa debit card upon opening your account.
Another great thing about the Chime Bank is that it isn’t reviewed by the ChexSystem. Subsequently, no matter what happens in your second-chance banking account, it won’t affect your credit score. Yet, the thing about this bank is that it has no on-land branches. You can only reach them through Customer Service, which isn’t top-notch at all.
- No overdraft fees
- Chime mobile app
- Free overdraft up to 200$
- Free international transfers
- Visa debit card included
- No minimum balance
- No ChexSystem review
- No tangible branches
- Hard to reach customer service
Last but certainly not least, we’ve got GoBank which is all about simplicity and supplying its clients with what they need but not anything above it.
It’s not followed by the ChexSystem review, so it provides its clients with this state of safety and peace of mind that what happens in GoBank stays in GoBank.
Moreover, it offers ATM reimbursement and cashback, which would motivate you to spend more wisely and save this money for more important things. Yet, it doesn’t offer a savings account nor interest on its funds.
Plus, if you choose to open your account online, you won’t be charged any opening fees for it, which is great as it has no tangible branches that you can go to and open an account.
- Free debit card
- Free mobile banking
- Free online account
- No ChexSystem review
- ATM reimbursement
- No tangible branches
- No interest
- No savings account
To sum up, there are so many ways in which you can end up with a bad credit score, but the thing is that there are just as many ways, if not more, to improve that credit score. The most important thing is establishing a mindset of wise spending and choosing the options that might seem lesser to you in regards to luxury but better in terms of responsibility towards your finances.
One of the best ways of curtailing your spendings and focusing more on savings is opening a second-chance bank account, which doesn’t require much effort, papers, or even funds from you.
All you’ve got to do is pay your bills on time, try to eliminate your loans one by one, and don’t go for an overdraft if you can help it. Plus, as you can see, the banks that offer this service tend to spoil their clients with its many advantages.