subject: How To Open Second Chance Checking Accounts [print this page] Second chance checking accounts, also referred to as fresh start checking accounts, are bank accounts that give another opportunity to people who have been reported to Chexsystems. The reason why those accounts exist is this: if you have had overdrafts that you failed to pay, for example, there's a good chance that the bank where you had your account will decide to close the account and write off the overdraft amount as a loss. But they will also report that negative experience to Chexsystems, which is a database that records such incidents.
Financial institutions widely use Chexsystems in order to lower their exposure to risk. They look up the database when they're about to open accounts for new clients and, if you're on the list, they decide that they'd rather not do business with you because you represent a risk, which is what they're trying to avoid.
Of course, second chance checking accounts have restrictions, because by nature they're geared towards people who (at least in theory) have shown some sort of inability to correctly manage their finances. So there are restrictions not only on the account activities, but also on which transactions can be performed. For example, many second chance checking accounts used to deny check writing privileges to their holders. Fortunately, things have changed for the better. Now not only can you write checks, but most of the other features of "normal" checking accounts are included as well: ATM withdrawals, online bill payment, direct deposits, and so on
Financial institutions insist that they use Chexsystems as a way to minimize risk. But there have been complaints about it too, since their database is not fool proof. If, for whatever reason, you've been put on that list, your name is going to stay there for five years, unless you find a way to get it off. And they don't make that option easily available. Most of the time, people who have successfully gotten their names removed have had to broker a deal with the bank that reported them, where they paid off the debt and the bank asked that their name be removed from the list.
Also, there's the issue of how banks use Chexsystems. Sometimes you'll try and open up accounts and be flatly turned down because you're on the list. Other times, even though you're on the list, the bank might try and gauge your situation according to other criteria and open the account for you anyway. In many cases, those financial institutions know that the database isn't 100% accurate and if you can offer a solid explanation of what happened, you can still get to open an account.
If you do open an account at a bank that offers second chance accounts, know that they all differ in what they ask of you. Some will ask for opening deposits, others won't. Some will require that you keep a minimum balance, others won't. And the best ones will automatically re-evaluate your situation in 6 to 12 months. If you've kept your account in good standing, you get upgraded to a regular checking account.
In short, a lot of banks have taken a less rigid approach to customers listed on Chexsystems, because they realize that lack of knowledge can play a big part in those customers' problems. And also, one mistake doesn't mean that you're necessarily going to be a bad client.
