The 11 Best Checking Accounts for Bad Credit
Bad credit can impact your life in a number of ways. If you have bad credit, you might find it difficult, if not impossible, to open a bank account.
In fact, about 25 percent of Americans are either underbanked or unbanked, according to a report from the FDIC. For those who are unbanked, they have no bank account whatsoever and must turn to payday loans, check cashing businesses, or prepaid debit cards to handle their finances.
However, bad credit doesn't necessarily mean you're doomed to forego a bank account forever.
There are ways to rebuild your relationship with the banking industry, including starting with a "second chance bank account."
What Is a Second Chance Checking Account?
Bad credit can make it tough to get approved for a checking account. On the other hand, not having a checking account often means getting hit with extra costs every time you need to cash a check or pay a bill.
So what are you supposed to do? Are you trapped in a Catch-22 of questionable banking history and hefty fees?
This is where second chance checking accounts come in.
Banks know that people aren't perfect, and many of them offer checking accounts designed specifically for people who need to rebuild their banking record.
If your banking history has a few speed bumps and blemishes, a second chance checking account can be a great way to get back on track. In most cases, banks that offer second chance accounts also offer an option to upgrade to a regular account after a certain period of responsible use.
However, second chance checking accounts can have their downsides. For example, some come with high monthly maintenance fees, and you might have a difficult time finding a physical branch location.
Despite potential drawbacks, second chance checking accounts can be an excellent opportunity to get your banking record back in shape.
The 11 Best Checking Accounts for Bad Credit
Second chance bank accounts cater specifically to people with bad credit. Because most mainstream banks deny accounts to people with rocky credit, you may need to seek out a financial institution that offers second chance accounts.
The good news is there is a long list of banks and credit unions that provide checking accounts for bad credit. As an added bonus, many of these second chance banks let you open a bank account online and manage it with a convenient mobile app.
Signing up for a second chance bank account gives you the opportunity to rehab your banking history. If you're committed to reestablishing your good banking record and repairing your credit, second chance banking could be a great option.
Here's a look at the 11 best checking accounts for bad credit.
BBVA has nearly 650 branches located in Texas, Alabama, Arizona, California, Florida, Colorado, and New Mexico. It also offers online banking in all 50 states.
As one of the top 25 largest commercial banks in the country, BBVA is one of just a handful of major banks that offers a second chance checking account program. Its size and market share are a plus for account holders, as its banking network offers more than 55,000 free ATMs around the country.
- No credit check needed to open an account.
- Get unlimited check writing, mobile deposits, online bill paying, cash back rewards, and the option for a Visa debit card.
- $25 to open an account.
- Opportunity to upgrade to a regular consumer checking account with no monthly fee after one year.
- Monthly service charge of $13.95.
- $3 ATM charge when you bank out of network.
- $38 insufficient funds fee.
- $15 deposit item returned fee.
Although BBVA charges a $13.95 monthly service fee for its second chance checking account, you can upgrade to a free checking account after one year.
Chime isn't a "bank" in the traditional sense. It doesn't have any physical locations, so you can't drive to your neighborhood branch and make a deposit.
However, it's a fully functional mobile bank with all the typical banking features. It's also FDIC insured, so your money is protected.
- There is no minimum payment required to open an account and no required minimum balance.
- No maintenance or overdraft fees.
- Use the Chime app to send money or deposit checks directly into your account.
- Chime doesn't use ChexSystems, so your bad banking record won't stop you from opening an account.
- Direct deposit for your paycheck, giving you access to your money up to two days sooner than traditional banks.
- No physical branches, so customer service is only available through the app, by phone, or through email.
- $2.50 fee for out of network ATM withdrawals.
With over 75,000 five-star reviews in app stores, Chime seems to be a hit with customers. Many users praise the ease and convenience of being able to open a checking account online instantly.
Owned by Green Dot Bank, GoBank is a mobile-only bank that lets you open a checking account without a credit check or ChexSystems report. Although there are no physical locations, GoBank has an impressive number of in-network ATMs.
- Checking accounts come with a free debit card.
- Mobile banking.
- Overdrafts aren't permitted, so you don't have to worry about overdraft fees.
- Avoid $20 minimum deposit and $2.95 sign up fee by opening your account online.
- $8.95 monthly fee unless you make monthly direct deposits totaling $500.
- $3 fee for out of network ATM withdrawals.
- $5 fee if you lose your card and need a replacement.
- Cash deposits at participating retailers can cost up to $4.95 per deposit.
While there are no physical branches, GoBank offers in-person deposits at places like 7-11 and Walmart. However, the downside is these stores charge up to $4.95 per deposit.
Founded in 2000, Axos bills itself as the "oldest and most trusted digital bank" in the country. While it has some physical locations in California, it's mostly a digital bank.
Axos offers a number of different checking accounts, including a second chance checking account.
- Overdraft protection available for a fee.
- Option to open a second chance savings account along with your checking account.
- Mobile banking.
- Minimum $50 deposit to open an account.
- $6.95 monthly maintenance fee when you have a regularly scheduled direct deposit. This fee goes up to $8.95 without a regularly scheduled direct deposit.
- No interest on checking accounts.
- Daily limits on debit card transactions, including a $310 limit on ATM cash withdrawals when you use your ATM card.
#5. Wells Fargo
Wells Fargo calls its second chance checking account the Opportunity Checking account. Account holders enjoy mobile banking and low fees.
As long as you maintain a certain monthly balance or set up a minimum number of direct deposits, the Opportunity Checking account amounts to a free online bank account.
- Make free transfers between your Wells Fargo checking and savings accounts.
- Overdraft protection available for a fee.
- Free ATM withdrawals at over 13,000 Wells Fargo ATMs around the U.S.
- Option to convert to a standard checking account after one year.
- Minimum $25 deposit to open an account.
- $10 monthly fee unless you keep your daily balance at or above $1,500 or you receive direct deposits totaling $500 each statement cycle.
According to the Wells Fargo website, the bank has 5,400 branches throughout the country, making it a good option for people who like the convenience of visiting a physical location.
Aspire Federal Credit Union has a version of a second chance checking account called Fresh Start Checking. To qualify, however, you're required to direct deposit 100 percent of your paycheck into your account each month.
- No monthly maintenance fee.
- Free debit card linked to your account.
- Large network of over 70,000 ATMs, with no fees as long as you stay in-network.
- Required to direct deposit your entire paycheck.
- Can't have any fraud history in your banking record.
First American Bank has branch locations in Illinois, Florida, and Wisconsin, as well as ATMs around the country. It also offers a Fresh Start Checking account for people with bad credit.
- Mobile and online banking.
- 55,000+ in-network ATMs around the country.
- Free check imaging with your online account.
- Unlimited check writing.
- No minimum monthly balance required.
- Minimum $50 deposit to open an account.
- $9.95 monthly maintenance fee.
#8. Bank of America
Bank of America offers a variety of checking accounts, including a second chance account called the SafeBalance Banking® Account.
- Large network of participating ATMs.
- Overdrafts are automatically declined, so you don't have to worry about incurring overdraft fees.
- Same-day cash, wire, and direct deposit transfers.
- Mobile check deposits.
- $25 minimum deposit to open an account.
- Can't write paper checks.
- $4.95 monthly maintenance fee.
- $2.50 fee per transaction at out of network ATMs.
#9. Peoples Bank
Peoples Bank is based in Texas, but it offers online banking to customers in all 50 states. It also offers an option to upgrade to a regular checking account after one year.
- Online banking as well as paper checks.
- Free Mastercard debit card linked to your account.
- No ATM fees as long as you stay in-network.
- Minimum $30 deposit to open an account.
- $4.95 monthly maintenance fee.
- $2 fee per transaction at out of network ATMs.
- $27.50 overdraft fee.
- $20 fee if you close your account within 90 days of opening it.
#10. Radius Bank
Radius Bank offers a second chance checking account called Essential Checking. Account holders can also upgrade to a Rewards Checking account after one year.
- No minimum balance required to open an account.
- 1% cash back on purchases.
- $9 monthly maintenance fee.
- $500 daily debit card limit.
- $1,000 daily mobile check deposit limit. The mobile check deposit limit is $2,000 per 10 days.
- $5 overdraft fee assessed each day account remains overdrawn.
Woodforest National Bank has approximately 747 branch locations spread across 17 states, so it's a good choice for people who want the option of visiting their bank in person. It also offers a Second Chance Checking account for people with poor credit or a bad banking record.
- Free electronic bank statements.
- Large network of participating ATMs.
- Free ATM transactions as long as you visit an in-network ATM.
- $25 minimum deposit to open an account.
- $9.95 monthly maintenance fee. This fee goes up to $11.95 if you aren't signed up for direct deposit.
- $9 one-time account set up fee.
- $32 overdraft fee per item.
- $15 fee to set up your debit card.
Bad Credit: Why You Still Need a Bank Account
As with many other things in life, modern banking has largely gone mobile. Whether you need to make an online purchase, pay your electric bill, or even buy a shirt at the store, you need the ability to conduct financial transactions quickly and securely.
Even if you're okay with conducting financial transactions on paper, you still need a way to pay your bills.
This is hard to do without a bank account. Without a banking relationship, you're stuck using money orders or cashier's checks to pay bills, or using check cashing services to access the funds in your paycheck.
You can try prepaid debit cards, but these won't work for everything. They also tend to come with high fees and sometimes even hidden fees.
Additionally, foregoing a banking relationship can make it tough to get a car loan or mortgage. Many lenders won't even consider a loan application if you don't have a bank account.
So how do you eliminate all the extra cost and hassle? By opening a bank account.
4 Ways to Get a Bank Account with Bad Credit
Just because you have bad credit doesn't mean you can't open a bank account. There are several strategies you can use to work around your poor credit history or shaky banking record.
#1. Look for Banks That Don't Require a Credit Check
Many banks use ChexSystems to review a potential customer's banking history. If your ChexSystems report shows a record of overdrafts, unpaid fees, or negative balances, the bank might deny your account application.
However, not all banks require a ChexSystems report to open an account, and some won't run a credit check before taking you on as a customer. Many banks that offer second chance checking accounts fall within these ranks.
When you search for a bank, review its policies online. Most banks that have a second chance checking account program explicitly state whether they conduct credit checks or use ChexSystems reports.
#2. Get Your ChexSystems Report and Dispute Any Errors
You might be familiar with your credit report and the dispute process, but did you know you can do the same thing with your ChexSystems report?
As with your credit report, you're entitled to one free ChexSystems report every 12 months under federal law. You can request your free report by visiting the ChexSystems Consumer Assistance website.
When you receive your report, review it to make sure it contains accurate information. Check for any mistakes or inaccuracies.
If you spot an error, you can dispute it with ChexSystems. You have the option to use the online dispute system or submit your dispute by mail.
You should also look for things like negative balances, insufficient funds fees, overdrafts, or unpaid loans. If you see any of these items, it's worth contacting the financial institutions listed on your report to see if you can negotiate a settlement in exchange for getting the negative information removed from your report.
In the event you can't get the negative items removed, make a list of the date each one appeared on your report. In most cases, negative items on a ChexSystems report automatically drop off after five years.
#3. Ask the Bank to Reconsider
If you've been denied for a checking account, you can ask the bank to take another look at your application. In some cases, banks might be willing to overlook a negative banking record if you have a compelling explanation.
For example, maybe you experienced a sudden illness that caused you to pay some bills late or bounce a few checks. Or perhaps you got laid off from your job and had to scramble to find new employment.
If you can show that your negative banking history is an anomaly caused by emergency circumstances, the bank might reverse its decision.
#4. Open a Second Chance Checking Account
Second chance checking accounts let you enjoy the perks of a bank account while letting you repair your banking history.
While you might pay higher fees for a second chance checking account, this is usually better than going without an account altogether. Assuming you use your checking account responsibly, many banks that offer second chance accounts let you eventually upgrade to a regular account with more features and fewer, if any, fees.
The Pros and Cons of a Second Chance Checking Account
Second chance checking accounts offer a number of benefits, but they're not without a few possible drawbacks. Here are some pros and cons to keep in mind.
Pros of a Second Chance Checking Account
A second chance checking account can be beneficial in several ways. Here are the top three.
Repair your banking history. A second chance checking account helps you rebuild your banking history, but you still need to practice good money management. If you make the same mistakes as you did in the past, you could end up making your situation worse.
Avoid excessive fees. Having a second chance account also lets you avoid accumulating the fees that come with prepaid debit cards, money orders, cashier's checks, and check cashing services.
Reestablish your relationship with the bank. Right now, you might be focused primarily on repairing your bad banking history. In the future, however, there's a good chance you'll want to take out a car loan or get a mortgage.
Opening a second chance account is the first step in rebuilding your relationship with the bank. Once you prove you're capable of managing your money in a responsible way, you stand a much better chance of getting approved for loans and other financial products.
Cons of a Second Chance Checking Account
Unfortunately, second chance checking accounts can come with some downsides. Here are three cons to watch out for.
High maintenance fees. Many second chance checking accounts come with monthly maintenance fees. Over time, these can add up.
While you might be able to avoid monthly service fees in some cases, most second chance banks will only waive these charges if you maintain a certain balance or set up a specific number of direct deposits.
No overdraft protection. Additionally, it's rare to find a second chance checking account that offers overdraft protection. While no one necessarily aspires to overdraft their account, some people feel peace of mind knowing they have the ability to temporarily overdraw their funds to pay an important bill or take care of an emergency expense.
Won't rebuild bad credit. Finally, a second chance checking account doesn't do anything to help repair bad credit. If you have bad credit, you'll need to take separate steps to improve it.
5 Things to Look for When Picking a Checking Account for Bad Credit
Now that you know the ups and downs of second chance checking accounts, you're ready to find one that fits your goals. Here are five things to look for as you prepare to shop around.
#1. Low or No Maintenance Fees
The reality is that most second chance checking accounts charge a monthly maintenance fee. You might also see this called a "service fee."
However, not every bank tacks on a maintenance fee. For example, both Chime and Aspire offer checking accounts with no monthly fees.
Additionally, banks like Wells Fargo waive the monthly maintenance fee as long as you keep you balance above a certain amount or set up a minimum amount of direct deposits.
#2. No Minimum Balance Requirements
When you're working hard to repair your banking history, it's best to avoid any potential stumbling blocks. If you open an account with a minimum balance requirement, you'll get dinged every time your balance drops below this amount.
To play it truly safe, look for a bank that doesn't require you to keep a certain amount of funds in your checking account. That way, you don't have to worry about accumulating any negative strikes against you.
#3. Free Services
There are a lot of banks out there, and they compete to earn your business. One way they do this is by offering various free perks that make life easier.
Some popular freebies to look for are free electronic bank statements, a debit card tied to your account, free online bill pay, unlimited check writing, and mobile check deposits.
#4. Mobile Banking
If you're one of the 81 percent of U.S. adults who own a smartphone, you could probably benefit from mobile banking. Today's mobile banking apps put powerful money management tools right in the palm of your hand.
For example, the best mobile bank apps let you check your balance on the go, and some even send you alerts every time your account changes. The ability to see your account in real time can be a big help when you're working hard to repair your banking history.
#5. Physical Branch Locations
As helpful as mobile banking can be, some people also like the convenience of being able to stop by their local bank branch. Having access to a brick and mortar location can be useful when you need quick customer service.
Additionally, working with a physical bank can come in handy down the road if you want to take out a loan or start a new business. This is why some people prefer building a banking relationship with a bank that has a physical presence in their community.
Prepaid Debit Cards: An Alternative to a Second Chance Bank Account
What if you need the features of a bank account but you don't want to open a second chance checking account? The most popular alternative to a second chance account is a prepaid debit card.
As the name suggests, a prepaid card requires you to load money up front. From there, you can make purchases as you would with an ordinary debit card, but only up to the amount you've paid in advance.
Like second chance checking accounts, prepaid debit cards don't require a credit check. You can also reload money as you go, which makes prepaid cards convenient.
This may sound great, but keep in mind that prepaid debit cards have their drawbacks. They won't help repair your banking history, and many of them have hidden fees that make them difficult to manage.
Although prepaid cards often come with high fees and limited flexibility, there are a few good options out there. If you're in the market for a prepaid debit card, here are four to consider.
The Netspend® Visa® Prepaid Card features a mobile app that helps you keep track of your balance and spending. There is also a direct deposit feature that gives you quick access to your paycheck each month.
On the downside, the card comes with some pretty high fees. Each purchase will cost you between $1 and $2, and you'll pay up to $9.95 per month in maintenance fees.
The Netspend card also charges a $5.95 inactivity fee if you don't use the card for 90 days.
The Wells Fargo EasyPay® Card offers free cash reloads, and there is no charge to activate the card. There are also no inactivity fees if you stop using the card for whatever reason.
Card holders also enjoy free ATM transactions at over 13,000 Wells Fargo ATMs across the country. Out of network ATM transactions are $2.50.
On the downside, the card comes with a $5 monthly maintenance fee. However, there are no purchase or point of sale fees, which makes the Wells Fargo EasyPay® Card more attractive than other prepaid debit card options.
The Bluebird card, which is issued by American Express, is one of just a handful of prepaid debit cards that doesn't charge fees when you load or spend money. There are also no monthly maintenance fees and no charges for inactivity.
Users can also write checks, set up direct deposit, and do mobile check deposits. On the downside, American Express isn't as widely accepted by retailers as Visa and Mastercard.
You can only get the Fifth Third Access 360° card from a Fifth Third branch, which means the card is only available to people in 10 states. However, Fifth Third's impressive ATM network offers free transactions at more than 50,000 ATMs around the country.
There are no purchase fees to use the card, however, you'll pay a $4 monthly maintenance fee unless you have a Fifth Third checking account or set up at minimum of $500 in direct deposits each month.
Quick Tips for Improving Your Credit Score
A second chance checking account won't help you improve your credit score, even if past credit mistakes resulted in your checking account showing up as a negative item on your credit report.
If you're going to work on repairing your negative banking history, however, it makes sense to do the same for your credit. Here are five tips for boosting your score as quickly as possible.
1. Pay Your Bills on Time
Your payment history is the single biggest factor that determines your credit score. It makes up 35 percent of your credit score, so even a couple late or missed payments can drop your score significantly.
As you work to repair your credit, make a list of all your regular bills. If possible, enroll in automatic bill pay so you never risk submitting a payment past the due date.
If you stick to a dedicated payment schedule, you'll be surprised how quickly your score improves. In the event you anticipate being a few days late on a payment, call your lender right away and ask if they'll give you a short grace period.
2. Pay Off Your Debts
After your credit history, your credit utilization is the most important factor that makes up your credit score. This is the ratio of how much available credit you have versus how much you're currently using.
Ideally, you should aim for a credit utilization below 30 percent. If you have a lot of debt, your credit utilization is probably above this threshold.
You can lower your credit utilization by paying down your debts. One strategy is to start with your lowest balance and focus on paying it off before moving on to the next one.
If you're paying a lot in interest, however, you might want to consider moving some of your debt to a low-interest credit card with a balance transfer. Another option is to ask your creditors for a credit limit increase, which can help improve your credit utilization.
3. Mix Up Your Credit Types
It's not always feasible to diversify your mix of credit, but it makes up 10 percent of your credit score. As such, adding different kinds of credit accounts to your report can be helpful when it comes to improving your score.
Lenders like to see a variety of credit types on your account. For example, if you have nothing but student loans, this can be a red flag that you're deeply in debt with little or no ownership in assets.
If you're bogged down with one kind of debt, it might help to add a different kind of account to the mix. This can be an auto loan, credit card, or mortgage.
On the other hand, you shouldn't open a bunch of new accounts for the sole purpose of diversifying your credit. This is likely to backfire by saddling you with new debt.
4. Avoid Opening New Accounts All at Once
"New credit" is the measure of how often you take on new credit accounts, and it makes up 10 percent of your credit score. In fact, even applying for too many new credit cards can cause your credit score to take a hit.
Each time you apply for a loan or a credit card, it adds a hard inquiry to your credit report. One or two hard inquiries here and there aren't a bad thing, but accumulating too many can pull down your score.
In short, you don't want lenders to think you're hard up for cash. If you need to apply for credit cards or installment loans, do your best to spread out your applications over several months rather than submitting a bunch of applications all at once.
5. Keep Old Credit Cards Open
Avoid closing old credit cards, even if you no longer use them. If you cancel old cards, you risk shortening your credit history and reducing your available credit.
Instead, keep old credit cards open whenever possible. This keeps your credit history intact and boosts your credit utilization by adding to your available credit.
A bad banking record doesn't have to stop you from opening a checking account.
With a second chance checking account, you can enjoy all the benefits and conveniences of banking without worrying about a credit check or ChexSystems record holding you back.
About the Author
Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in CNBC, Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.