What is second chance banking?

  • A poor bank account history can affect your ability to open a checking account.
  • Some institutions offer second chance bank accounts if you can’t open a standard checking account.
  • Second Chance Banking serves as an important stepping stone for formerly incarcerated people.
  • Read more Personal Finance Insider stories.

your ability to open a checking account it often depends heavily on your bank account history. Most financial institutions use ChexSystems, a credit reporting agency, to assess a person’s trustworthiness. If you have a banking history, you will not be able to open an account, which may affect your ability to access additional banking products and services.

Several financial institutions offer second chance bank accounts to provide a path for people who struggle to open a bank account. The role of the second bench recognizes the systemic barriers in banking, whereby formerly incarcerated individuals and unbanked communities have access to financial opportunities.

What is second chance banking?

Second Chance Banking helps people who are normally unable to open a checking account by providing access to financial products and services. Financial institutions with second-chance banking options typically offer a special checking account that won’t review a person’s previous banking history.

A second chance checking account has limited banking features to minimize the risk of potential bank fees. For example, many second chances


reviewing accounts

will not come with checks or debit cards to avoid overdraft fees. Others may have less monthly service fees o Minimum balance requirements to facilitate account management.

Second chance checking accounts can be used to rebuild your credibility. After a period of time, from a few months to a few years, you will be able to open a traditional checking account with the bank.

Why is second chance banking important?

Second Chance Banking closes the banking gaps that affect communities of color and low-income communities.

Hispanic and black bank customers pay disproportionately more in checking account costs than white customers. People struggling to keep up with fees may have their bank account closed by a financial institution if they can’t keep it up.

Many people of color also struggle to even open bank accounts.

Bank On, a program run by the nonprofit organization the Cities Fund for Financial Empowerment, helps connect unbanked and underbanked communities with bank accounts.

Tori Hamilton, the Bank in Connecticut program manager, says common barriers to banking among these communities include high minimum account requirements and specific U.S. ID. If you don’t have a U.S. ID or Social Security number, you may be deny you the opening of a bank account.

Second chance bank accounts often serve as a feasible banking option for new bank account customers or customers with poor banking history because they have low minimum opening requirements and minimal bank fees. Financial institutions that offer second chance bank accounts can also make it easier for people to open an account with a foreign ID or passport.

Constance Alberts, director of Bank On Greater Milwaukee, says having a bank account is integral to everyone because it lays the groundwork to enable people to reach their financial goals.

“If you start with that basic foundation of having a bank account, that changes the focus for a lot of people because now you’re saving money. If you’re saving money, that means you can have money to pay bills. So if you have money to pay bills, you’re paying bills on time. If you’re paying bills on time, then that affects your credit score. Once your credit score is affected, you can do other things.” Albert says.

The Role of Second Chance Banking in Bringing Financial Freedom to Former Incarcerated

Second Chance Banking also serves as an important step in financial freedom for people who have been incarcerated.

Nancy Eiden, founder and board member of the nonprofit organization alliance first stepsays that a high percentage of recently incarcerated people are unbanked or unbanked both before and after their incarceration.

When these people try to open a bank account, they may be denied because they don’t have proper identification or because of their criminal record. Those who had bank accounts prior to incarceration could also experience involuntary bank account closure due to inactivity or significant fees.

Eiden says it’s incredibly important to provide formerly incarcerated people with banking services and financial education as soon as possible, so they have the resources to help them build credit, save money and achieve sustainable financial independence.

Bank On Connecticut is also working with the Connecticut Department of Correction to provide formerly incarcerated people with second chance bank accounts.

“We’re working with re-entry centers across the state. When a returning citizen first comes home, they’re taken to a re-entry welcome center. At that welcome center, they’re offered an Android phone. We’re going to embed the Dora app on that phone so these accounts can be opened right away for these people,” says Alberts.

Alberts adds any commissary money that comes to them in the form of a check that can be deposited into their new bank account and spent.

How to find banks with second chance bank accounts

First Step Alliance works with financial institutions to help formerly incarcerated people open and apply for banking services. Provides access to digital financial education and credit counseling through partnerships with re-entry programs.

The nonprofit is also in the process of creating a credit union dedicated to meeting the financial needs of formerly incarcerated people and their families and will begin the application for a new charter next month.

Eiden says it’s difficult for formerly incarcerated people to qualify for banking products and services at most financial institutions, so starting a credit union is an important step in reaching more people and addressing a broader systemic problem.

Community Development Financial Institutions (CDFI) and FDIC Designated Minority Depository Institutions (MDI) also often serve local communities and recognize barriers specific to communities of color.

Below you will find CDFIs and MDIs that we have reviewed that have second chance banking options. You can read our reviews to learn more about each financial institution:

  • Carver State Bank: Carver State Bank is a black-owned bank in Savannah, Georgia. The bank has first-time and second-chance checking accounts for people who have difficulty opening checking accounts with financial institutions.
  • Commonwealth National Bank: Commonwealth National Bank is a black-owned bank in Mobile, Alabama. The bank has a “Fresh Start” checking account for people with bad or no credit.
  • First Independence Bank: First Independence Bank is a black-owned bank in Michigan. The bank’s First Choice Checking account is a second chance checking account.
  • First Imperial Credit Union: First Imperial Credit Union is a credit union run by Hispanic Americans in California. The credit union Opportunity Checking account is offered to anyone who has difficulty opening a traditional checking account.
  • GECU Credit Union: GECU is a Hispanic-American led credit union with 12 branches in El Paso, Texas. GECU Second Chance Checking allows you to upgrade to another GECU checking account free of charge after six months.
  • Guadalupe Savings and Credit Cooperative: Guadalupe Credit Union is a Hispanic-American-led credit union in New Mexico that also received a Together We Advance designation. The credit union offers a second chance debit account if you don’t qualify for financial tools or services at most banks.
  • hope credit union: Hope Credit Union is a Black-owned credit union with locations in Alabama, Arkansas, Louisiana, Mississippi, and Tennessee. The bank offers a debit-only bank account and an “Easy Checking” account to rebuild banking history.
  • OneUnited Bank: OneUnited Bank is the largest black-owned bank in the US, with branches in Boston, Los Angeles and Miami. The bank also offers online accounts. At OneUnited, there’s a second chance checking account called U2-E Checking.
  • River Bank: Rio Bank is a Hispanic-American-led bank with 15 branches in Texas. Fresh Start Checking is the bank’s second chance checking account.
  • River City Federal Credit Union: River City Federal Credit Union is a Hispanic-American led credit union with 4 locations in San Antonio, Texas. Fresh Start Checking is a second chance bank account that helps you rebuild your financial history for 12 months. After 12 months, you will have the opportunity to open a traditional checking account at the credit union.
  • St. Louis Community Credit Union: St. Louis Community Credit Union has 17 branches in Missouri. The credit union offers a second chance checking account with checking and a debit card.
  • Sun Community Federal Credit Union: Sun Community Federal Credit Union is a credit union run by Hispanic Americans in California. The bank has a second chance bank account called Select Checking.
  • The first bench: The First Bank is a community development financial institution with 65 branches in Alabama, Georgia, Illinois, Mississippi and Louisiana. The bank has a second chance checking account without checks, and you can upgrade to another checking account after six months of opening it.
  • Federal Credit Union for Transit Employees: Transit Employees Federal Credit Union is a minority-run credit union with a branch in Alexandria, Virginia, and another in Washington, DC. The Fresh Start account is the bank’s second chance bank account option.

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