Traditional Second Chance Bank Accounts
Second Chance checking accounts are designed for people who have been denied the opportunity to open normal checking accounts due to past banking difficulties or bad credit. The reasons a person may be denied may vary greatly, but once they’ve been reported to an agency or networks like ChexSystems it is a long difficult road to reestablishing credibility, especially in today’s economic environment.
Banking fees and account minimums
Second-chance checking accounts are designed to help you rebuild your credibility with banking institutions. But like regular checking accounts, there is usually a monthly fee ranging between $8 and $30, based on your daily account balance or total assets held at the institution. In many cases, the minimum balance is waived if you meet the monetary threshold or participate in direct deposit with deposits of at least $250 each month. Most thresholds require at minimum of $1000 – $1500 daily balance, and on the higher end from $5000 or more. With the advances in technology, second chance banks now offer features like online bill pay, direct deposit, debit cards, text alerts, online and mobile banking. However second chance checking accounts do not include premium features like free checks, debit rewards programs, or overdraft protection.
For persons seeking second chance checking accounts, the ultimate goal is to develop a checking history that leads the institution to believe you’re a reliable customer as soon as possible, so that you can enjoy the features most customers enjoy. One of the drawbacks of a traditional bank account and debit card is that banks will allow you to overdraw your account and in turn charge an overdraft or NSF fees up to $35 per incident and they also charge an extended overdraft fee if the account remains in an overdrawn state in excess of 3-5 days.
The better alternative to traditional or second chance checking accounts and a quicker path to repairing your credit history
A more viable alternative is to second chance checking is to obtain a Prepaid Credit Card. They are generally issued with either a MasterCard or Visa logo. With a prepaid credit card you can only spend what has been loaded or deposited into the account. Because you can only spend what has been loaded or deposited on the card, you will never be charged costly overdraft fees or have to wait to see if a check you wrote has cleared the bank. You will always know your available balance and there is no minimum balance to open an account or to maintain the account. Prepaid credit cards offer the same features as a traditional bank account: Free direct deposit, free bill pay, free text and email alerts. Free Mobile applications now provide you with the power of banking on the go. From your phone you can check balances, transfer money and more. Prepaid credit cards give you the second chance you deserve. And for those of you preferring the ease of electronic transfers, prepaid credit cards typically come with an account and ACH routing number for bank account cash transfers.
The better alternative to a regular credit card
A Prepaid Visa or MasterCard lets you enjoy all of the benefits of a credit card without paying high interest fees and going into debt. You can use it to shop online, pay bills, access thousands of ATMs and they are accepted anywhere Visa or MasterCard is accepted. (Note most ATM fees can be avoided with cash back transactions). Most prepaid credit cards will also report your regular transactions and recurring bill payments to participating credit reporting agencies which gives you the benefit of building or rebuilding a favorable credit profile with your everyday purchases.
Potential customers include:
• Adults seeking to reduce impulse spending or stay on a budget.
• Students or other individuals under the age of 21 who do not have a credit card (new credit laws now require a co-signer for persons under 21 who cannot prove sufficient income to pay their bills)
• Parents wanting to teach their children money management skills.
• Consumers who are unable to open a traditional bank account (approximately 43 million U.S. citizens)
• Online shoppers wanting to limit the risk of debit or credit card fraud (since you can only spend what is on the card, there is a lower risk of exposure if someone gets your card information, cardholders also enjoy the benefits of Visa or MasterCard Zero Fraud Liability Protection for non-PIN transactions)
• Tourists wanting a prepaid currency card without the hassle of expensive exchange fees
Online Application and Guaranteed Approvals
Since you can only spend what you put on your card. There are no credit checks or banking accounts required. Thus prepaid credit cards provide guaranteed approval for all consumers. The only requirement is identity verification which is done during the online application process which can be completed in minutes. Apply for the card online and receive your new card in the mail generally within 7-10 days.
There are fees associated with prepaid credit cards, and the schedule of fees should be reviewed carefully when applying for a card. However, the fees are generally significantly less than a traditional bank account, especially fees associated with account minimums and overdraft and NSF fees. On average the prepaid credit card holder saves several hundred dollars each year by eliminating theses fees as well as check cashing fees.
A prepaid credit card will empower you and simplify your life saving you time and money. You will enjoy all the benefits of a credit card without incurring high interest fees, overdraft fees, minimum balance and deposit requirements, eliminating check cashing fees and the costs of money orders. More importantly you will not incur any debt and you have the ability to build a favorable credit profile by simply using your card for your recurring and everyday purchases.