Bank Accounts

Second Chance Banking: Does it really exist?

There are a number of banks which are prepared to offer accounts to people with bad credit or those with limited or no credit history. These accounts will generally offer only basic facilities and are not likely to include services such as overdrafts, credit cards, check books or debit cards.

There are companies which specialize in creating and running accounts for people with bad credit and there are other well known credit companies which may be able to offer a bad credit option.

How are “second chance” accounts different from typical checking accounts?

Accounts will only be basic, most offering a bill payment facility and a cash card but no other facility. Some will offer a cash card which can only be used at their own branches. Some banks will re-assess the terms of an account every so often. The frequency of these assessments varies between companies. An account holder running a successful account may be offered further options and facilities in the future which will depend upon the conduct of the account.

Most companies only require a minimal deposit to open a bad credit account although some require a larger amount. Some also request that the account holder is able to deposit a regular monthly amount. This amount will vary from bank to bank.

Who can open a second chance account?

A bad credit account can usually be opened by anyone provided that they are working and earning at least the minimum expected monthly deposit for the account. There are a few types of account where the deposit will be accepted from means other than a working wage as well as some which do not require a regular deposit at all.

These accounts are usually easy for the consumer to understand and maintain. A credit check is still carried out by some to determine which facilities to offer the applicant although with the most basic accounts, the only requirement is a regular income and therefore a credit check may not be necessary.

Do these types of accounts accrue interest?

Bad credit bank accounts will often pay very little or no interest although applicants should always carry out thorough searches themselves to determine their best option. Some bad credit accounts, in particular the higher interest accounts, are “paid to maintain” accounts where the bank will charge a set or personally arranged amount to run the account. This is due to risk limitation. The banks are risking losing money when offering bad credit accounts and will, in some cases, require this as collateral and to off-set any loss they may make. These costs may be revoked on review of successfully conducted accounts.