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• A poor bank account history may affect your ability in opening 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 folks.

Your ability to open a checking Account is often largely dependent on your bank account history. Most financial institutions use ChexSystems— a credit reporting agency — to evaluate a person’s trustworthiness. If you have a banking history, you won’t be able to open an account, which may impact your ability to access additional bank services and products. 

The best second chance bank accounts provide a pathway for people who struggle to open a bank account. The role of second banking acknowledges systemic barriers in banking, so formerly incarcerated people and unbanked communities, in particular, have access to financial opportunities.

What is second chance banking? 

Second chance banking helps people who normally can’t open a checking account. Financial institutions with second chance banking options usually offer a special checking account that won’t review a person’s past banking history.

A second chance checking account often have limited banking features to minimize the risk of potential bank fees. For example, many second chance checking accounts will not come with checks or debit cards to avoid overdraft fees. Others may have lower monthly service fees or minimum balance requirements to make it easier to manage the account. 

Second chance checking accounts may be used to build back your credibility. After a certain time — anywhere from a few months to a few years — you’ll be able to open a traditional checking account with the bank.

Why is second chance banking important?

Second chance banking bridges gaps in banking 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 who struggle to keep up with fees may have their bank account closed by a financial institution if they can’t maintain it. 

Many people of color also struggle to open bank accounts.

Bank On, a program that’s led by the non-profit organization the Cities for Financial Empowerment Fund, helps connect unbanked or underbanked communities with bank accounts.

Tori Hamilton, the former Bank On Connecticut program manager, says common barriers to banking among these communities include high minimum account requirements and specific US identification. If you don’t have a US ID or Social Security number, you may be denied from opening a bank account. 

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

Quick tip: If you’ve struggled to open a bank account because you don’t have a US ID, read through our guide on bank and credit unions that make it easy for non-US citizens to open an account.

Constance Alberts, a former director at the Bank On Greater Milwaukee, says having a bank account is integral for everyone because it builds a foundation for allowing 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 may have money to pay bills. Then, 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’re able to do some other things,” says Alberts.

The role of second chance banking in providing financial freedom for formerly incarcerated 

Second chance banking also serves as an important step in financial freedom for formerly incarcerated people.

Nancy Eiden, founder, board member, and secretary of the non-profit organization First Step Alliance, says a high percentage of recently incarcerated people are unbanked or underbanked both prior to and following their incarceration.

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

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

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. It provides access to digital financial education and credit counseling through partnerships with reentry programs. 

The non-profit organization is also in the process of creating a credit union dedicated to meeting the financial needs of formerly incarcerated individuals and their families. In 2022, the National Credit Union Administration approved a new charter application for the proposed credit union, Diverge Proposed Federal Credit Union. First Step Alliance is seeking funding to establish regulatory requirements and has a goal of opening the credit union in 2024.

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

Community development financial institutions (CDFIs) and FDIC-designated minority depository institutions (MDIs) also often serve local communities and acknowledge barriers specific to communities of color. 

Below, you’ll find CDFIs and MDIs we’ve reviewed that have second chance banking options. You can read through our reviews for more information about each financial institution:

• Chime: Chime has checking and savings accounts that do not require a credit check or review by ChexSystems.
• Capital One 360: Capital One doesn’t use ChexSystems when you open any bank accounts.
• Dave: Dave is a mobile fintech platform with a bank account that doesn’t require a credit check. 
• Dora Financial: Dora Financial is a mobile banking platform that’s fully available in English and Spanish. It has a checking account that doesn’t require a credit check.
• SoFi: SoFi doesn’t use ChexSystems to see if you qualify for SoFi Checking and Savings.
• Varo: Varo doesn’t use ChexSystems to review your bank account history when you open the Varo Bank Account or Varo Savings Account.
• Carver State Bank: Carver State Bank is a Black-owned bank in Savannah, Georgia. The bank has Second Chance and First-Time Checking Accounts for people who struggle to open 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 Hispanic American-led credit union in California. The credit union’s Opportunity Checking Account is offered to anyone who struggles to open a traditional checking account.
• GECU Credit Union: GECU is a Hispanic American-led credit union with branches in El Paso, Texas. GECU’s second chance checking account lets you upgrade to another GECU fee-free checking account after six months.
• Guadalupe Credit Union: Guadalupe Credit Union is a Hispanic American-led credit union in New Mexico that’s also received a Juntos Avanzamos 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 for rebuilding banking history.
• OneUnited Bank: OneUnited Bank has branches in Boston, Los Angeles, and Miami. The bank also offers online accounts. At OneUnited, there’s a second chance checking account called the U2-E Checking.
• Rio Bank: Rio Bank is a Hispanic American-led bank with branches in Texas. The Fresh Start Checking account 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 locations in San Antonio, Texas. The Fresh Start Checking Account is a second chance bank account that helps you rebuild your financial history over 12 months. After 12 months, you’ll have the chance to open a traditional checking account at the credit union.
• St. Louis Community Credit Union: St. Louis Community Credit Union has branches in Missouri. The credit union offers a second chance checking account with checks and a debit card.
• The First Bank: The First Bank is a community development financial institution with 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.
• Transit Employees Federal Credit Union: Transit Employees Federal Credit Union is a minority-led credit union with one branch in Alexandria, Virginia, and one in Washington, DC. The Fresh Start Account is the bank’s second chance bank account option.
• Woodforest National Bank: Woodforest has over 760 branches in 17 states. The bank’s second chance checking account with a one-time $9 set-up fee.

Products in this post: Chime Checking Account, Capital One 360 Checking, Dave Spending Account, Dora Financial Everyday Checking Account, SoFi Checking and Savings, Varo Bank Account, TheFirst Step Checking