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A second chance checking account is a type of checking account designed for those with bad credit and a history of extremely poor performance with traditional checking accounts. Providers of second chance checking accounts often require more stringent proof of income and reliability prior to opening such an account as well as maintenance of a minimum balance. Often, those needing a second chance checking account are those listed on ChexSystems, a directory of people with a history of bouncing checks or continually overdrawing their accounts.
From the account holder's perspective, a second chance checking account can be useful for both writing and cashing checks and for repairing his or her credit rating. A history of bouncing checks can be detrimental to a person's ability to navigate everyday life, and second chance accounts provide an avenue for rehabilitation. the rehabilitation, however, can come with a price.
Banks that offer second chance checking accounts do so because such accounts allow them to offer vital services to a segment of the population that has no other alternative. Banks charge annual, semi-annual or monthly fees for maintenance of such accounts. They may also require account holders to maintain a minimum checking account balance and impose substantial fees or penalties for balances that fall beneath the predetermined minimum.
Such penalties, critics argue, can be detrimental to those who have already demonstrated poor performance with personal finances. Proponents contend that second chance checking accounts provide a much needed avenue for account holders with poor credit and banking performance to rehabilitate their financial records. Proponents also cite the tougher penalties instituted by banks for second chance accounts as a key factor in helping account holders straighten out their day-to-day financial habits.
On a practical level, a second chance checking account operates — aside from penalties and restrictions — no differently than a regular checking account. An account holder still possesses an account number, a routing number, and a checkbook with checks that are honored like those from traditional checking accounts. The holder of a second chance account must also balance his or her checkbook at regular intervals to ensure the account's stability and optimal performance. Some banks even offer similar perks, such as check cards and fee waivers for electronic direct deposits credited at regular intervals, to second chance account holders just as they do for traditional account holders.
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