Second-chance banking is a group of financial rebuilding opportunities offered by certain banks and credit unions. If you've had some monetary missteps in the past and would like to get your finances in order again, a second-chance banking product might be just what you need. Keep reading to find out more about second-chance banking and how it could help you reach your financial goals.
What is Second Chance Banking Anyway?
Second chance banking is a blanket term that can refer to a few different banking products. All second-chance banking products are specially designed for consumers who can't qualify for regular checking accounts, credit cards, or loans because they have some blemishes on their credit reports or banking history. Second-chance banking can also help consumers who have never had a bank account, credit card, or other financial history to get started. Many people feel that they're forced to live without a bank account, or simply rely on a prepaid debit card, if they have a poor or nonexistent financial past. But, second-chance banking opportunities expand your choices and give you the building blocks you need to start over.
Second Chance Checking as an Alternative to Prepaid Debit Card
A prepaid debit card does have some advantages, since it's easy to use and won't allow you to spend more money than you actually have. But, prepaid debit cards don't help you reestablish or build a good banking history. That's where a second chance checking account can come in to help. With a second chance checking account, you can write checks just like with a normal account. Of course, you can link a debit card to the account as well. The main difference between second-chance checking and traditional checking is that second-chance checking doesn't generally allow any overdrafts. You can also expect a monthly maintenance fee to maintain the account, but it's generally quite reasonable. By having a second chance checking account rather than a prepaid debit card, you can establish a positive history with your bank or credit union. Eventually, this can pave the way to opening a traditional checking account.
Avoid Letting Overdraft Fees Hurt Your Credit
Overdraft fees can cause serious damage to your banking history and your credit report, especially if you never paid them. Second-chance checking accounts prevent this worry by simply prohibiting you from going into overdraft. With a second chance checking account, you can write checks and use your linked debit card with confidence, knowing that you're not risking overdraft fees and credit damage
Second Chance Banking Products to Rebuild Your Financial Health
There are several second-chance banking products to choose from. All of the following options can work separately or together to help you build your financial future.
1. Second Chance Checking
Second chance checking is the cornerstone of a rebuilding strategy. Anyone can qualify, even if you've still got some past debts to pay. Establish your second chance checking account as soon as you can, and then start using it regularly to pay your bills and establish a history of responsible money spending.
2. Secured Credit Card
A secured credit card, which is sometimes also known as a prepaid credit card, is typically a low-limit card that is secured by your own funds. So, it works much like a debit card in that a $200 deposit equals a $200 spending limit. But, the big difference with a secured credit card is that the credit card helps you build a credit history. With consistent responsible use of your secured credit card, you can improve your credit history and gradually trade it in for a traditional unsecured credit card with larger credit limits.
3. Secured Loans
A secured loan isn't a traditional loan. With this type of loan, you borrow a set amount, but you don't actually use the money. But, with every loan payment you make, the bank or credit union sends a positive report to the credit bureaus. This helps you build a positive credit history, and then when the loan's paid off the funds are released to you. At Finex we also offer secured auto loans, so you can get into the vehicle you need to achieve better financial opportunities while still helping to build your credit.
If your goal is to reestablish - or newly establish - a credit history, it makes sense to take advantage of all the second-chance banking options. Not all financial institutions have the option to give everyone a second chance. At Finex we are here to help you wherever you are in your financial journey. Learn more about how second-chance banking can give you the new start that you deserve today!
For more details on how a second chance banking account may help your financial situation, review our "Roadmap to Building Credit: Second Chance Checking and Specific Steps to Rebuilding Credit".