Second chance bank accounts for bad credit

Having bad credit can make it difficult to get approved for a bank account. Many banks are hesitant to open accounts for people with low credit scores or a history of overdrafts and unpaid fees. But there are still options out there.

A second chance or bad credit bank account gives people with financial mistakes in their past a fresh start. These accounts have more relaxed eligibility requirements so those with no credit or poor credit have a better chance of approval.

What are second chance bank accounts?

Second chance checking and savings accounts are designed for applicants with:

Low credit scores (usually below 600)
Limited credit history
Past bank account closures due to overdrafts or unpaid balances
Bankruptcies or foreclosures
Outstanding unpaid bank fees

People in these situations often get denied for traditional bank accounts. Second chance accounts provide an alternative. The banks that offer them take on more risk with applicants. But in return, the accounts come with tighter restrictions.

Applicants still undergo background checks and credit reports. But the banks place more emphasis on your recent history. They want to see you have resolved old issues and improved your finances. Having steady income is a major plus.

Top second chance checking and savings accounts

Here are some of the top banks that offer second chance checking and savings accounts:

Axos Bank: Second Chance Checking

Axos Bank offers a fee-free second chance checking account. There is no minimum opening deposit or monthly balance requirement.

The account has free:

Debit card
Online and mobile banking
Bill pay
Domestic wire transfers
Person-to-person payments

To be eligible you must:

Be 18 years or older
Have a valid ID
Not have any current outstanding issues with Axos Bank accounts

Axos Second Chance Checking has no monthly maintenance fees. But other fees can apply for overdrafts, out-of-network ATMs, etc.

Bank of America: SafeBalance Banking account

Bank of America’s SafeBalance account is a second chance checking account designed for customers with a history of overdrafts.

There are no overdraft fees with SafeBalance. Instead, transactions will be declined if you don’t have enough money in your account.

The SafeBalance account offers:

Monthly maintenance fee of $4.95
Free online and mobile banking
Free debit card
No overdraft fees

To qualify for a SafeBalance account, you must:

Owe no outstanding balances to Bank of America
Have no recent bankruptcies or foreclosures
Provide proper identification

Bank of America also offers a regular checking account to graduates of its BankOn financial literacy program.

BBVA: Easy Checking account

BBVA offers an Easy Checking account with two options:

Easy Checking: $25 minimum opening deposit, $5 monthly maintenance fee
Easy Checking with Interest: $100 minimum opening deposit, $5 monthly maintenance fee

The Easy Checking accounts are available to applicants who have:

Non-negative banking histories
ChexSystems records
Limited credit histories

Both accounts include:

Free ATM card upon request
Free online banking with bill pay
No minimum balance requirement
No overdraft fees

The Interest Checking account pays 0.01% APY on balances up to $10,000.

U.S. Bank: Safe Debit Account

The U.S. Bank Safe Debit account is a second chance checking account with no overdraft fees.

It has a $4.95 monthly maintenance fee unless you maintain a $500 minimum daily balance.

The Safe Debit account offers:

Free debit card and online bill pay
No overdraft fees (transactions will be declined)
Up to $20 refunds on out-of-network ATM fees per statement period

To get approved for a Safe Debit account, you must:

Pay off any outstanding balances with U.S. Bank
Have no recent bankruptcies
Pass a background check

U.S. Bank also offers secured credit cards to help rebuild your credit.

Chime: Fee-free checking and savings

Chime offers second chance checking and savings accounts with no monthly fees.

Both the checking and savings accounts have no minimum balance requirements. There are also no overdraft fees. Transactions are simply declined if your balance is insufficient.

Key features include:

No monthly maintenance fees
Free debit card
Early direct deposit
No overdraft fees
Free cash deposits at over 60,000 retail locations

Chime uses technology like Plaid to evaluate applicants rather than traditional credit reports. This gives those with no credit or bad credit a better chance of approval.

Alternatives to second chance bank accounts

In addition to designated second chance checking/savings accounts, there are a few other options for basic banking with bad credit:

Secured credit cards

Secured credit cards require an upfront security deposit. This deposit acts as your credit limit. Secured cards let you build credit by making on-time payments. They can help establish positive payment history.

Some have the option to graduate to a regular unsecured card after 1 year of responsible use.

Prepaid debit cards

Prepaid cards let you load funds in advance and use the card to spend that amount. They offer the convenience of a debit card without needing a bank account.

However, prepaid cards often have monthly fees unless you meet certain balance requirements. And they lack many of the other benefits of a real checking account.

Credit builder loans

Credit builder loans are available from some credit unions and banks. You borrow a small loan, which is held in a savings account as you make payments. On-time payments are reported to the credit bureaus.

After the loan is repaid, you get the money that was held in the savings account. Credit builder loans can help establish positive payment history to raise your credit score.

Requirements for approval

Here are some of the common eligibility requirements for second chance bank accounts:

Minimum opening deposit: Most banks require an opening deposit ($25 to $100) to fund the account.
U.S. citizen or resident alien: Must be able to provide a Social Security number or Individual Taxpayer Identification Number (ITIN).
Proper identification: Valid U.S. driver’s license or state ID, passport, etc. Some banks may limit based on certain states.
No recent bankruptcies/foreclosures: Typically cannot have any in the last 12-24 months.
No outstanding balances/fees owed: You’ll need to settle any overdrawn balances or unpaid fees with the banks you owe money to first.
Steady income: Proof of income may be required via pay stubs, benefit statements, etc. Some minimum income level may be needed.
ChexSystems review: Banks will verify you don’t have abuse history reported to ChexSystems. Too many overdrafts or fraud can disqualify you.
Limited open accounts/inquiries: Applying for multiple accounts in a short period can make approval more difficult. Banks may limit the number of new accounts.

Not all applicants with bad credit will qualify for second chance accounts either. But improving your finances and waiting for negative items to age can help your chances.

How to get approved

Here are some tips to increase your odds of getting approved for a second chance checking or savings account:

Maintain employment/income: Having steady income from a job, benefits, retirement, etc. makes approval more likely.
Clear any previous bank balances: Settling outstanding fees or overdrawn balances owed improves your chances.
Avoid new credit applications: Limit new credit inquiries and account openings before applying. Too many looks desperate.
Build savings: Even a few hundred dollars in savings boosts your qualifications. It shows financial stability.
Wait for negative items to age: Older bankruptcies, defaults, etc. have less impact than new ones.
Bring documentation: Bank statements, proof of income, and other records help verify your situation.
Choose your bank carefully: Compare offerings to find the right fit based on fees, history, requirements, etc.
Open a secured card first: Establishing positive payment history with a secured card can help your case.

With effort, it is possible to get an account with less-than-perfect credit history. Opening a second chance account and using it wisely can begin rebuilding for the future.

How to use your second chance account responsibly

Getting approved is just the first step. Using your second chance checking or savings account prudently is crucial for rebuilding credit and trust with banks.

Here are some tips for using your account responsibly:

Make payments on time: Setting up automatic transfers or reminders helps pay bills before due dates. Paying late can still impact your credit.
Avoid overdrafting: Opt out of overdraft “protection” if offered. Monitor balances closely. Leave buffer amounts.
Set up alerts: Many banks allow text/email alerts for low balances, suspicious activity, etc. These can prevent issues.
Limit uses early on: Don’t immediately take advantage of features like checks, ATM access, etc. until you prove responsibility.
Make regular deposits: Consistent on-time deposits, even in small amounts, demonstrates stability.
Don’t close early: Closing an account soon after opening it can still reflect poorly with banks. Keep it open for at least a year if possible.
Graduate options: Some banks “graduate” second chance accounts. You can request a review after 6-12 months of good standing.
Build savings: Saving provides flexibility and prevents the urge to overspend checking funds. Automatically transfer a portion of each deposit.
Monitor credit reports: Checking credit reports helps ensure no fraudulent or erroneous activity slips through.
Ask for limit increases: Ask to raise low card limits after 6+ months of on-time payments to expand usability.

With time and diligent use, a second chance account can be a stepping stone to mainstream banking relationships again.

Pros and cons of second chance bank accounts

Second chance checking and savings accounts provide useful access to banking. But they aren’t perfect.

Here are some key pros and cons to consider:

Pros

Get approved despite past mistakes
Avoid check cashing fees
Rebuild banking relationships
Establish positive payment history
Easier access to credit in the future
More secure than carrying cash
Direct deposit and conveniences of debit card

Cons

Higher minimum balances and fees
Lower transaction limits
Declines if balance is insufficient
Difficult to qualify for other financial products initially
Negative info still impacts credit score and future applications
Can shut account for overdrafts, fraud, etc.

For many people with troubled financial histories, the pros outweigh the cons. Second chance accounts provide an opportunity to slowly rebuild credit and re-establish sound money management habits.

Alternatives to big banks

Big banks aren’t your only option when it comes to second chance accounts. Many smaller banks and credit unions offer similar programs.

Compared to large banks, credit unions and community banks often provide:

Lower fees
Higher interest rates
Better customer service
Less stringent approval requirements

This makes them a potentially good choice for second chance applicants. They may be more understanding of past mistakes and willing to give you another opportunity.

Some credit union second chance programs include:

Freedom First Credit Union – Fresh Start checking
Silver State Schools Credit Union – Excel Checking
California Coast Credit Union – ReStart checking

Community banks with second chance checking include:

First Entertainment Credit Union
Quest Capital Bank
Guaranty Bank

You can also check local credit unions and community banks in your area. Compare them to big bank offerings and fees to find the best fit.

Getting a second chance savings account

In addition to checking accounts, some banks offer second chance savings accounts. These work similarly by relaxing approval requirements.

Second chance savings accounts allow you to:

Rebuild credit by making consistent deposits
Establish a positive history with a bank
Earn a little interest
Have money separated for goals like an emergency fund

The benefits of a second chance savings account include:

Easier approval than a traditional savings account
Low opening deposit ($25 to $100) required
Low or no monthly maintenance fees
Interest earnings on deposits
Compounded interest increases balance faster
Helps show financial stability

The main requirement is usually maintaining a minimum account balance. Falling below the threshold can result in fees. Minimum balances range anywhere from $100 to $500 with second chance savings accounts.

Some banks also limit the number of monthly transactions, so it cannot replace a checking account. But combined with a checking account, savings provides a well-rounded way to manage money wisely.

Rebuilding credit with a second chance account

Second chance bank accounts help rebuild credit in a few key ways:

Establish new payment history

Making consistent on-time deposits and avoiding overdraft fees builds positive history with the account issuer. This shows you are managing the account responsibly.

Many banks provide regular updates to ChexSystems, which tracks your activity. Good history can improve your standing for future bank account applications elsewhere.

Allow credit line increases

Using a secured card or starter regular card within the account judiciously and paying on time shows lower risk. After 6-12 months, request a higher credit limit for the card. This shows growth.

Higher open credit with on-time history helps boost credit scores as you demonstrate reliability.

Support credit applications

Opening additional secured cards or credit builder loans linked to the account lets you establish on-time payment records with multiple credit issuers simultaneously.

The additional accounts appear on your credit reports, further evidencing stability and worthiness. Just be sure not to open too much credit at once.

Provide savings for security deposits

Growing the account’s savings balance provides money needed for deposits when applying for other secured credit cards and loans in the future.

Lenders view funds on hand to make the security deposit as a positive factor, knowing the funds are available and set aside specifically to secure credit.

With time and prudent financial behaviors, second chance accounts allow the opportunity to slowly but surely rebuild credit, savings, and trustworthiness.

Common questions

Here are answers to some frequently asked questions about second chance bank accounts:

How long does it take to rebuild your credit with a second chance account?

It takes consistent, responsible usage over time – usually at least 12 months – before seeing significant positive impacts to your credit from a second chance account. Ensure you make all payments on time and keep balances low.

Positive information remains on your credit report for many years, so the longer you use the account properly, the better it reflects on you.

Do you get approved for second chance accounts with no credit history?

People with no credit history have a possibility of getting approved for second chance accounts but less likely than those with some history. Without a credit report, banks have less data to review.

You may improve chances by providing strong proof of income, showing you have emergency savings already, and trying community banks rather than large banks. Opening a secured card can also help establish initial credit file.

Can opening a second chance account lower your credit score?

Simply opening a second chance account itself doesn’t directly lower your credit score. However, the related hard inquiry when banks check your reports results in a small temporary score decrease. Too many new accounts at once also negatively impacts scores.

How do I raise my credit score quickly after getting a second chance account?

The quickest boosts come from lowering utilization on existing revolving accounts, paying down balances, and disputing any errors on your credit reports. But truly raising it over the long term relies on prudent use of the second chance account for at least a year to rebuild positive history.

What happens if I overdraft a second chance account?

Overdrafting means spending more than your available account balance. Different banks have varying policies but most will close your account if you overdraft frequently. Some may allow one overdraft. Relatively small first-time overdrafts can be repaid promptly without necessarily leading to account closure.

Summary

Despite past financial mistakes, second chance checking and savings accounts provide a way to rebuild banking relationships. These accounts make approval more attainable for people with low credit scores or limited credit history.

While these accounts carry more fees and restrictions, they allow access to essential banking services. Handled responsibly, they can demonstrate financial stability to pave the way for mainstream credit products again.

Comparing account features across banks helps find the right fit. Nationwide banks, community banks, and credit unions are all expanding second chance offerings. With time and diligent usage, they provide a path forward.