In the past ChexSystems had a monopoly on blacklisting individuals from banking at any major institution. However, the information age has given consumers many avenues of recourse as well as institutional avenues of revenue in addressing the needs of those with ChexSystems records. The excessive availability of the internet has brought online access into the lives of many people, which has allowed individuals to access their financial accounts from anywhere with an internet connection. This stretches far beyond the limits of prior decades when if one wanted to handle their finances, they were limited to the institutions that had offices in their immediate area.
Before we look into the specific banks that offer fully functional banking alternatives the first thing that a person on ChexSystems needs to understand is how they plan to use a bank account and what account features are required.
How Do You Bank?
The question that needs to be asked is, “How do you bank?” This is an open ended question and even though many people feel they need the features of a brick and mortar bank branch office to serve their needs, the fact is that most people do not use these offices for anything more than for services that they can find elsewhere. For example, most people want a checking account and yet it is becoming increasingly rare that anyone writes a physical check. Think for a moment how rare it is to see someone writing a check for a purchase at a store. Even when paying rent or a mortgage payment most mortgage companies and even property managers accept payments online or via a debit or credit card. For monthly bills, it is becoming more and more difficult each year to pay with a check and easier to simply pay utility bills with an automatic payment or by online bill pay.
This is important to understand because even though most people feel they need access to checks, the reality is that they need access to a debit card and internet connection for online bill pay. Now certainly there are times when a person would like to have a check to make a payment or purchase, but those times are the exception and normally can be handled with a money order or cash. The though of using a money order may stop you and make you say, “No, I want checks,” but you need to remember that this is about surviving while on ChexSystems. In this case it is better to address the majority of transactions and think of a work around for the rare occasion when a check is needed.
In the end the purpose of this exercise is to understand how you bank and precisely the services you need. Once you determine how you use a bank then you can decide which ChexSystems alternative is right for your needs. Think about all the transactions that are required during a month. Can they all be handled by online bill pay? How about a debit card? Do you need both or will just a debit card be acceptable? These are important differentiations because the more features you need and the more traditional bank accounting you determine you need to handle your finances, the more difficult it will be to find a ChexSystems alternative. Then once found, the more expensive it will be to maintain that account.
Prepaid Debit Cards – More than You Would Expect
If your finances are relatively simple and yet you need a place that will accept a direct deposit (ACH) for your paycheck then consider one of the many prepaid credit cards. These cards are debit cards with either the Visa or MasterCard logo and are accepted anywhere that accepts those credit cards. They are also fully functional debit cards and allow the user to withdraw cash from any number of ATM networks worldwide.
With dozens of issuing companies and varied fees between each, there are unlimited alternatives in finding the right card with the right features and benefits that meet your needs. Some of these cards even include an online bill pay feature where you can log in online and pay bills. The debit card company will issue a check and make a payment on your behalf by withdrawing the funds from your pre-paid card balance. Most of these cards are designed to be an all in one banking solution. Therefore they also accept direct deposit (ACH) of paychecks for no extra charge and if you have a need to add money to the card that is not coming from your paycheck, then you can normally add money with ease using a variety of methods for depositing on that type of card.
Most of these cards have no credit check, no Chex-Systems check and no real restrictions on approval. Simply apply, add money or direct your direct deposit paycheck to the card and you are now fully functioning in spite of your ChexSystems record. Some of the name of cards that offer these services are:
- Horizon Card – A credit card that claims to have no credit check, guaranteed instant approval, reports to a major credit bureau, and offers a guaranteed $500 unsecured credit limit.
This is a partial list of the pre-paid card alternatives available to anyone on ChexSystems. None allow you to have a physical checkbook, but short of that and with the inclusion of online bill pay they are very close to a fully functional account that can handle the finances of most individuals.
Second Chance Bank Accounts
The concept of a second chance bank account is that anyone can make a mistake and they should not be penalized by the banking system for simply not being able to hold to the strict structure of their last bank account. This is not necessarily a matter of discipline. For many it is a matter of income and mistakes. One mistake can easily turn into hundreds of dollars in service charges and when a person is on a limited budget, they cannot afford to pay those service charges without going further into debt. As a result they let an account close with a negative balance that was 90 percent made of service charges and then they find themselves with a ChexSystems record.
The difference between a second chance bank account and a bank that does not use ChexSystems is that the institution offering the second chance account knows you have a Chex record and yet, at times, allows you to have access to a fully functional checking account. Whereas a non-ChexSystems bank is simply an institution that is not aware of your Chex record because they do not subscribe to the ChexSystems network. It is also important to understand that just because a bank has a Second Chance Bank account offered, it does not mean that the bank must open an account for anyone on ChexSystems.
For example if a person has a ChexSystems record that is a year old for insufficient funds activity, the second chance bank knows the customer was not necessarily involved in intentional fraud and therefore can afford to take a risk and open an account for that person. But if the ChexSystems record comes back showing that the person was reported for fraud or some other type of nefarious activity, then the Second Chance bank will more than likely not open an account for that person.
Second Chance bank accounts are offered by hundreds of financial institutions across the United States. Many of these institutions are Credit Unions and community or regional banks, which have on their Federal Charter that they must meet the financial and deposit needs of all members of their local community. The offering of a Second Chance Bank account is part of showing to their regulators that they are committed to the development of the local community and that they do not discriminate in any way against lower income individuals.
Most Second Chance checking accounts will offer the services of a standard checking account but likely will be significantly restricted on the availability of funds. For example, a
ny deposit that is not cash, direct deposit (ACH), or guaranteed funds will likely not be released until the expiration of what is called an “extended hold”. This hold would likely be 7 business days for a check that pays through a local bank and 10-12 days for a check that pays through a non-local bank. This extended hold may also apply to traditional no hold items such as cashier’s checks and even checks from the US Treasury.
The reasons these extended hold times are oftentimes applied to Second Chance account customers is because the bank takes a significant risk when accepting a check for deposit and then releasing the funds of that check to the customer before the funds are collected from the bank the check was drawn against. Other types of restrictions common to Second Chance Bank Accounts are restrictions on the use of ATM or Debit cards and the number of times per month a person can use in-branch services.
Each bank has their own ways of protecting themselves while still maintaining a Second Chance bank account program. With the availability of these accounts, they are primarily to appease the regulators and consumer groups and not necessarily the customer. However, the account remains a solid alternative way of banking for customers with a ChexSystems record who only have limited options.
Questions to Ask When Considering a Second Chance Checking Account
Even though most individuals with a ChexSystems record feel they are lucky to simply get an account opened at any bank, it remains prudent for that individual to shop around and find an institution that is going to allow the maximum in functionality and limited restrictions.
Shopping around for the best Second Chance account to suit the needs of a particular person requires that person to think through the ways in which they plan to interact with a bank. Do they primarily use direct deposit, ATM, and debit card services? If so, then that person must find a Second Chance account that allows for full functionality and access to ATM and Debit cards. If the person simply uses online bill pay, no checks, but deposits a lot of checks from multiple parties, then that person will want to seek out an account that does not extend the holds on all deposits. A person that has direct deposit, never writes checks, and only uses debit cards. This person should seek out a bank that once again, allows debit card access. These are only a few of the many types of banking that individuals require. Examining personal habits, needs, and requirements is critical before a person accepts a Second Chance account that restricts them from banking in a necessary manner.
Therefore the following questions should be asked, at a minimum, in order to determine the use of restrictions on the Second Chance account:
- Are there restrictions or extended holds on deposits?
- Is there full ATM and Debit card access, one or the other, or neither?
- Is online bill pay available?
- Does the account accept direct deposit?
- Are printed checks available?
- Are there any other limitations on the account?
While most of these questions are fairly common, forgetting any one of them could leave a person with an account that significantly hinders their account needs. With hundreds of banks offering Second Chance accounts, finding one that suits the needs of the individual is not difficult.
Directory of Second Chance Checking Banks
The following is a free list of banks that offers Second Chance checking accounts to customers with a ChexSystems record.
- Academy Bank (CO)
- Bank of the West (CA)
- Bank With United (DC, MD, OH, VA, WV)
- Chase Bank (Nationwide)
- Compass Bank (AL, AZ, CA, CO, FL, NM, TX)
- Los Angeles Federal Credit Union (CA)
- Liberty Savings Bank (CO, FL, OH, SC)
- US BANK (Nationwide)
- Vantage Credit Union (MO)
- WoodForest Bank (AL, FL, GA, IL, IN, KY, LA, MD, MS, NY, NC, OH, PA, SC, TX, VA, WV – many branches located within super Walmarts)
- Wells Fargo Bank (Nationwide)
For more detailed information select your state below.