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.”
The 14 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 14 best checking accounts for bad credit
BBVA is one of the biggest names in the banking business, with physical branches in several states and online banking available as well.
When you bank with BBVA, you can rest assured you’re entrusting your funds to one of the nation’s largest and most reliable banks.
BBVA’s Second Chance Checking Account is hard to beat, with minimal account requirements and full banking services.
- Visa debit card
- Unlimited checks and mobile deposits
- Cashback rewards
- Full-service online banking
- No credit checks for new accounts
- No ATM fees at participating ATMs
- $25 minimum initial deposit
- Budgeting tools
Just note that this account comes with a monthly fee of $13.95 for the first year, after which time you can upgrade to a regular checking account.
You could also be charged for insufficient funds and returned deposits.
2. GoBank Online Checking
Second on the list is GoBank, a mobile banking service offered by Green Dot Bank.
GoBank isn’t concerned with your credit history, so they don’t check your credit report or ChexSystems.
As a fully online bank, GoBank does not have any brick and mortar branches, but it does have a large network of fee-free ATMs.
- A debit card
- Free cash withdrawal from 42,000+ ATMs in-network
- Mobile banking services
- Waiver of minimum deposit when you open your account online
- No overdraft fees
- In-person deposits at Walmart and 7-11 with $4.95 fee
- $8.95 monthly fee – waived with minimum of $500 in monthly deposits
3. Bank of America
Another bank with major brand-name familiarity, Bank of America provides people with subpar credit the opportunity to open a checking account.
The SafeBalance Banking® Account is designed with second-chance checking in mind.
You don’t have to worry about overdrafting from the account, as Bank of America automatically declines charges that exceed your account balance.
While you can’t write physical checks, you get a number of benefits from a name you can trust, one with local branches nationwide.
- Large ATM network with fee-free transactions
- $2.50 transaction fee at non-participating ATMs
- Mobile deposits
- No overdraft fees
- Same-day transfers
- $25 minimum to open the account
- $4.95 monthly fee
4. Wells Fargo
Wells Fargo is yet another major bank offering checking account services to individuals with bad credit.
You don’t have to worry about being declined based on your credit history with the Clear Access Banking Account from Wells Fargo.
The Clear Access Banking account provides you with full-service banking resources.
- Free transfers between your Wells Fargo checking and savings accounts
- No Overdraft of NSF fees
- No check writing ability
- 13,000 ATMs with free withdrawals nationwide
- Upgrade to a standard checking account after 12 months
- $25 minimum to open the account
- $5 monthly fee (waived for account owners between the ages of 13-24)
5. First American Bank
Another solid choice for a checking account with bad credit is First American Bank.
If you live outside of Florida, Illinois, or Wisconsin, you may be unfamiliar with the bank, but it offers online banking across the nation.
You can start your journey to improving your finances with First American’s Fresh Start Checking Account and all of its advantageous features.
- Mastercard® Debit Card
- Mobile, online, and phone banking
- Paperless statements
- 55,000 ATMs nationwide with free withdrawals
- Limitless check writing
- $9.95 monthly fee
- $50 minimum to open the account
6. Radius Bank
Radius Bank is another great option for bankers with bad credit, who are eligible for its Essential Checking account.
The online bank excels in the technology department, with user-friendly online tools designed to help you get your budget in order and keep it on track.
If you’re looking for more than just basic checking account services, Radius Bank and its Financial Dashboard is your go-to.
- Mobile bill payments and deposits with $1k daily deposit limit
- Paper checks
- Debit card with Apple Pay, Google Pay, and Samsung Pay functionality
- No minimum required to open the account
- $500 daily limit on debit card purchases
- $5 overdraft fee
- $9.00 monthly service charge
- Eligibility for upgrade to Rewards Checking after 1 year
7. Fifth Third Express Banking
Fifth Third is an established bank that makes checking accounts with bad credit simple.
Fifth Third Express Banking® is a great option if you’re looking for a no-frills account with minimum requirements.
Though the account comes with some limited features, it also has minimal fees and restrictions.
- No credit requirements
- No overdraft fees
- Zero monthly fees or minimum balance requirement
- Mobile deposits
- Mobile/online banking
- No check deposits or cashing at ATMs
- Option to deposit at local Fifth Third branches
8. Aspire Federal Credit Union
Aspire Federal Credit Union is a unique option for applicants who’ve struggled to get approved elsewhere due to bad credit.
Aptly named, their Fresh Start Checking Account helps you to build credibility in your money management.
To join Aspire, you simply need to make a donation to one of the credit union’s partnering nonprofits.
- Debit card
- Requires 100% direct deposit each paycheck
- Fraudulent-free record
- Zero monthly fees
- Online account management
- 70,000+ fee-free ATMs in network
Chime is an up-and-coming fully online bank with services designed for individuals without great credit.
The FDIC-insured online bank has everything you need, with hardly any requirements or penalties tied to its accounts.
The bank’s app has amassed an impressive amount of perfect reviews, suggesting it provides a convenient and navigable experience for account holders.
- No ChexSystem review
- No minimum payment to open an account, or monthly minimums
- Zero monthly fees, period
- Mobile deposits and transfers
- Direct deposits for paychecks
- $2.50 fee on ATMs outside Chime’s network
Rounding out the list of the best checking accounts for poor credit is Axos. Axos has been thriving in the online-only banking work since its inception in 2000.
You can find a few physical locations in California, but the bank is mostly digital.
Axos provides several checking account options, including a rewarding second chance checking account.
- Mobile banking
- Second chance savings accounts available
- Overdraft protection at an additional cost
- $50 minimum to open the account
- $6.95 monthly fee, subject to increase to $8.95
- $310 withdrawal limit per ATM transaction
11. OneUnited Bank
OneUnited Bank’s Online Checking Accounts are available to people in ALL STATES. We like OneUnited Bank because customers can add cash to the OneUnited Bank Debit Card at over 90,000 locations across the country through a partnership with Green Dot®.
OneUnited Bank offers several checking accounts but the U2 E-Checking Account is a checking account specifically designed for bad credit that will help you get back on track. To get started go to the blue “Get the Card” button and enter your name and email address then press the orange “apply now” button to complete the application process.
U2 E Checking Features:
- Minimum opening deposit of $50
- Get paid up to 2 days early with early direct deposit
- Free Online & Mobile Banking
- Obtain Cash, Surcharge Free at Over 30,000 ATMs Nationwide
- Deposit checks through the mobile app using Mobile Remote Deposit Capture
- Free Bill Pay
- OneUnited also offers a secured credit card that reports to the major credit bureaus.
- The second chance checking account has a $12.95 fee.
- $37 insufficient funds fee.
- A charge of $7.50 will be assessed for each bill payment returned unpaid due to non-sufficient.
12. Corporate America Family Credit Union
Corporate America Family Credit Union offers a fresh start checking account that gives you the chance to rebuild a positive checking account history. You must become a member of Corporate America Family Credit Union to open a checking account.
Fresh Start Checking Account Details:
- You must keep at least $100 in your Regular Share Account at all times.
- $10 monthly fee.
- Bill Pay and Popmoney
- Be a member of Corporate America Family Credit Union.
- Visa debit card
- Get In Balance, a free online study course that empowers you with the tools you need to better manage your checking account.
- $10 monthly fee.
13. Woodforest National Bank
Woodforest National Bank offers a Second Chance Checking account for people with poor credit or a bad banking record. With approximately 747 branch locations in 17 states, it’s a good choice for people who want the option of visiting their bank in person.
Woodforest Second Chance Checking Features:
- $25 minimum deposit to open an account.
- Free electronic bank statements.
- Large network of participating ATMs.
- Free ATM transactions as long as you visit an in-network ATM.
- $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.
- $15 fee to set up your debit card.
14. Unify Financial Credit Union
Unify Financial Credit Union offers the “Right Start Checking for first-timers or account holders looking to rebuild a positive checking account history.”
Right Start Checking Account Details:
- Open with a $25 deposit and no minimum balance requirement.
- Pay no monthly or per-check fees.
- Enjoy Overdraft Protection up to $250.
- Get free access to eBanking.
- $30 Non-sufficient funds fee
- $25 Returned Deposit Item fee
What is a checking account for bad credit?
Banks offer checking accounts for bad credit because they understand people make mistakes with their accounts often out of a lack of knowledge.
Many people don’t get a basic financial education, whether at home or in school. Many people open a checking account when they reach a certain age, but no one tells you how to manage a checking account.
You would think financial literacy would be a mandatory subject taught in school just like civics, but it’s not. The Council for Economic Education report found that the number of states that require a high school student to take a personal finance course — either a standalone class or integrated into other coursework — in order to graduate is only 21.
It’s not uncommon to have both bad credit and ChexSystems records. The two often go hand-in-hand. One reason is that a bank can report an unpaid negative account balance from an overdraft to ChexSystems, then later the bank can sell that debt to a collection agency. The collection agency can then report the debt to the credit bureaus – causing bad credit.
3 Reasons people with bad credit need a bank account?
Having the ability to conduct financial transactions quickly and securely is vital in a largely mobile society. Whether you need to pay a utility bill, quickly transfer money to friends or family members, or make an online purchase, you need the ability to conduct financial transactions fast and securely.
- Fewer people use cash. Conducting transactions with cash or money orders is slowly becoming obsolete, especially in the wake of COVID-19. Some retailers and fast-food joints are requesting customers to pay with debit or credit cards only This is hard to do without a bank account.
- Check-cashing stores are expensive. Using check cashing services to access the funds in your paycheck is time-consuming and costly. According to the Financial Health Network, unbanked and underbanked Americans spent $189 billion in fees and interest on financial products in 2018.
- Lack of a banking relationship. Another major issue with conducting financial transactions without a bank account is the lack of a banking relationship. Not having 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
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.
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.
4. Fifth Third Access 360°
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.
How To Remove Inquiries From Your Credit Report
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.
There’s no reason to pay a check cashing store or pay prepaid debit card fees when bank accounts for bad credit are available throughout the U.S. Open a checking account for bad credit to save on prepaid debit card, money order, money-loading and check cashing fees.
Who you’re banking with matters to your overall financial health. Managing a bank account responsibly in the long run and can save you money and time, but most of all help you build wealth.