Bad credit has wide-reaching consequences, even on your ability to open a bank account. Checking accounts for bad credit can get you back to banking plus save you money.
If you’re currently unbanked, you are not alone. A recent FDIC report stated (approximately 7.1 million households) were unbanked.
Unbanked Americans are likely forced to pay high fees at checking-cashing stores and when using prepaid debit cards.
Thankfully, there are some banks that understand financial hardships or account mismanagement habits lead to the need for bad credit bank accounts.
Check out the top 10 checking accounts for bad credit and dump your prepaid debit card.
Best Free Checking Accounts for Bad Credit
1. BBVA Bank
BBVA’s Online Checking account is available in all states except Alaska and Hawaii. BBVA is one of the few major banks that offer second chance checking accounts with full checking features like a Visa debit card, unlimited check writing, online bill payment, mobile deposits, direct deposit, and cash-back rewards.
BBVA won’t charge you for using its ATMs or those belonging to the AllPoint network, which currently covers around 64,000+ free ATM locations throughout the country. That means you can make cash and check deposits the same as you would at BBVA ATMs.
BBVA Online Checking Account Features
- Apply with only a $25 opening deposit
- No monthly service charge
- Complimentary Online Banking and Mobile Banking, plus Mobile Deposit® and Bill Pay.
- Mobile Check Deposit
- Send money to virtually anyone, within minutes, using just an email address or mobile phone number
- Earn cash back on everyday purchases using your debit card
- No ATM fees nationwide at 64,000 BBVA USA and participating non-bank ATMs.
- Automatic rebate of ATM fee charged by other banks.
- Deposit cash and checks at Allpoint® Network ATMs.
- $3 Paper statement fee unless you opt to receive online statements.
- $38 insufficient funds fee.
- $15 deposit item returned fee.
2. 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.
- $37 insufficient funds fee.
- A charge of $7.50 will be assessed for each bill payment returned unpaid due to non-sufficient.
3. Wells Fargo Bank
Wells Fargo offers the Clear Access Bank Account for customers unable to open standard accounts due to past credit or banking history. You will not be able to convert into any other Wells Fargo account for the first 365 days from the date your new account was opened. After the 365-day period has elapsed, you will be eligible to convert the account into any Wells Fargo checking account offered at that time.
Clear Access Banking Features:
- No overdraft or non-sufficient funds (NSF) fees
- No paper checks
- Bill Pay and online transfers
- Mobile deposit
- Debit card with contactless and chip technology
- 24/7 customer service
- Free access to more than 13,000 Wells Fargo ATMs
- Budgeting, cash flow, and spending tools
- Text banking
- Minimum $25 deposit to open an account.
- $10 monthly fee unless you keep your daily balance at or above $1,500 or you receive direct deposits totaling $500 each statement cycle.
4. Fifth Third Express Banking®
Fifth Third Express Banking® offers a simple way to manage your funds. The Visa® Debit Card gives you immediate access to your money along with the convenience and security of a banking relationship. But note this is a bare-bones account due to no credit score requirement.
The Express Banking account does not offer check writing or check deposits at ATMs. But on the plus side, there’s no monthly service charge, balance requirement or overdraft fees.
Fifth Third Express Banking® Details:
- No Monthly Fee.
- No balance requirement or overdraft fees.
- No check writing or check deposits at ATMs.
- Check cashing and deposits at Fifth Third branch locations.
- Mobile Deposit with immediate funds availability.
- Mobile and Online Banking.
- No check writing.
- No ATM check deposits.
- No online bill pay.
5. Bank of America
Bank of America offers a basic checking account called the SafeBalance Banking® Account. It’s a no-frills account that does not charge overdraft fees by declining any transaction where you don’t have enough money in your account.
You do not get check writing privileges with this account but it comes with convenient ways to pay individuals or businesses — use a debit card or Online Banking to make purchases, pay bills, or pay individuals.
SafeBalance Banking® Account Details:
- $25 minimum balance to open an account.
- Large network of participating ATMs.
- Overdrafts are automatically declined, so you don’t have to worry about incurring overdraft fees.
- Same-day cash, wire, and direct deposit transfers.
- Mobile check deposit
- No fee at thousands of Bank of America ATMs
- $2.50/transaction at Non-Bank of America ATMs in the U.S.
- Can’t write paper checks.
- $4.95 monthly maintenance fee.
- $2.50 fee per transaction at out-of-network ATMs.
6. GoBank Online Checking
GoBank is a mobile checking account owned by Green Dot Bank. GoBank doesn’t use ChexSystems or run a credit check to verify new accounts. GoBank offers in-person deposits for a fee at places like 7-11 and Walmart.
GoBank Online Checking Account Details:
- $8.95 monthly fee unless you set-up direct deposits that total at least $500 each month.
- No ChexSystems or credit check used
- $4.95 to deposit cash at participating retailers like 7-11 or Walmart
- $2.95 fee and minimum opening deposit of $20 if you open your account at a retail location or FREE to open if you sign up online or via mobile
- Two ways to get cash for free: via in-network ATMs or cashback with a debit card purchase
- Cash deposits can cost up to $4.95.
- No traditional savings account.
- No interest earned.
7. 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. How to Join: Qualify through the Hope Group to become a member of the credit union.
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.
8. 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.” How to Join: Qualify through Western Federal Credit Union which allows potential members to join through a complimentary membership with a partnering nonprofit organization: Surfrider Foundation or Friends of Hobbs.
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
9. Aspire Federal Credit Union
Aspire Federal Credit Union offers the “Fresh Start Checking” for members who face challenges with getting approved for checking accounts at banks and “other” financial institutions. Build a positive financial record with Aspire. How to Join: Donate to one of 15 participating organizations, such as a $5 gift to the Land Trust of North Alabama.
Fresh Start Checking Account Details:
- Mandatory Direct Deposit – full allocation (100%) of your paycheck
- No Fraudulent History Record
- No monthly checking account fee
- No ATM transaction fees when using the surcharge-free ATM network
- Access to 70,000+ surcharge-free ATMs
- Free online and telephone account access with My CU Online and Call24
- Accompanying debit card
- Entire paycheck direct deposit required. Cannot split direct deposit among other banks.
- Can’t have any fraud history in your ChexSystems, EWS, or any other checking account consumer reporting record.
10. First American Bank
First American Bank offers a Fresh Start Checking account for people with bad credit that has digital tools, a low minimum opening deposit, and no minimum balance requirement. There are branch locations in Illinois, primarily the Chicago area, and a branch in Coral Gables, Florida.
If you’ve had difficulty opening a checking account at other banks, First American Bank’s Fresh Start Checking Account may work for you.
Fresh Start Checking Account Details:
- Free First American Bank Mastercard® Debit Card
- Free mobile and online banking
- Free eStatements
- Access to over 55,000 surcharge-free Allpoint and Presto! ATMs*
- Unlimited check writing
- Free check images online
- Free Bank-by-Phone
- No minimum balance requirement ($50 to open the account)
- $9.95 monthly fee
- Minimum $50 deposit to open an account.
- $9.95 monthly maintenance 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.
But just like you can rebuild credit, banking privileges can be restored with a checking account for 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.
Be Careful of Overdrafts with your new account
Avoid overdrafts with your new account by keeping track of your money. Most bank accounts, if not all, allow online access and apps that offer up-to-date account information and alerts.
Bank accounts for bad credit and second chance banking accounts are typically not free, as you can tell from the above-listed options. But, most banks and credit unions will give you an opportunity to upgrade to a free account or at the very least, an account that offers more benefits after a 12-month proof of good account management.
Your new account is more than likely to be monitored by the bank. If you’re prone to overdrafts, you need to be conscious of your balance at all times and open a bank account that offers overdraft protection or an overdraft line of credit.
How you landed in ChexSystems
Unpaid overdrafts are often the reason people end up with a ChexSystems or EWS record. But overdrafts can cause bad credit too. An outstanding checking account balance may be sent to a collection agency.
Once that happens, the debt may get listed on your credit reports. Collection accounts generally remain on credit reports for 7 years (whether it’s paid or not).
If you owe an outstanding banking debt, paying it typically doesn’t get it removed from your report early. That’s why people need bank accounts for bad credit.
5 Workarounds to Open a Checking Account with Bad Credit
Bad credit doesn’t mean you can’t open a checking account. Here are workarounds to open a checking with bad credit.
1. Look for banks that don’t use ChexSystems
If bank accounts for bad credit are not an option, the next best alternative is banks that don’t use ChexSystems. These accounts are very similar to bank accounts for bad credit but the main difference is they don’t use ChexSystems to verify new accounts.
When banks open a checking account for bad credit customers, they may use ChexSystems to verify new account openings but decide to give customers a fresh start. On the other hand, banks that don’t use ChexSystems never see your negative banking records at all, which might be a better option for consumers with multiple ChexSystems records.
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. Challenge your ChexSystems Report and Dispute Errors
ChexSystems does not operate as an unregulated company. Because ChexSystems is considered a consumer reporting agency, they are subject to federal laws, in particular, the Fair Credit Reporting Act. You have the right to challenge errors on your ChexSystems report the same as you can with your credit reports.
Federal law entitles you to a free ChexSystems report every 12 months under federal law. If you are denied a bank account or job due to entries on your ChexSystems report you can get a free report within 60 days of the denial.
After reviewing your ChexSystems report online, you can dispute any mistakes or inaccuracies. You have the option to use the online dispute form to submit your dispute online, by mail, or via fax.
Here is what to review on your ChexSystems report:
- Negative balances
- Insufficient funds fees
- Unpaid loans
Supporting documentation should be submitted with ChexSystems disputes if it exists. If you are unsuccessful in the dispute process with ChexSystems, dispute directly with the bank that reported you. Banks that report customers to ChexSystems must adhere to the same requirements under the Fair Credit Reporting Act.
ChexSystems or the bank generally must investigate the dispute within 30 days of receiving it. The dispute will either be verified as accurate or not. In some instances the bank or ChexSystems will not complete the investigation in 30 days, in such case, the account must be deleted. ChexSystems or the bank will have 5 business days after completing an investigation to notify you of the results.
If you have the funds, try negotiating a settlement with the bank or collection agency for the debt in exchange for getting the negative information removed from your ChexSystems report, essentially similar to a credit account pay for delete.
3. Request Reconsideration
Just like you can request reconsideration when denied for a credit card, you can ask a bank to take another look at your account application. With instant approval bank accounts, the automated process can overlook compelling hardships that may have caused a negative banking record.
A denial may be overturned with a manual review of your application. 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
If bank accounts for bad credit don’t fit your needs, second chance checking accounts are a good option that will let you enjoy the perks of a bank account while restoring your banking history. If you prefer in-person banking, your local community bank or credit union may offer second chance accounts near you. Look for a financial institution that puts emphasis on helping customers and forming a personal banking relationship.
5. Temporarily use a prepaid debit card
I know we said, “dump your prepaid card.” But if you have exhausted all options, temporarily using a prepaid debit card will at least offer a limited form of banking. Card.com offers prepaid cards with early direct deposit plus you get a $50 sign-up bonus. Loading cash is easy with over 90,000 Reload at the Register locations. This account is good for people with bad credit because there is no credit check or ChexSystems to open.
Prepaid Visa® Account Features
- Minimum opening deposit $0.
- Get paid up to 2 days early with direct deposit.
- No monthly fee with direct deposit of $1,000.
- 32,000 Fee-Free MoneyPass® ATMs.
- Cash pre-printed payroll or government checks at participating Walmart locations.
- Load cash at 7-Eleven, Western Union, Walmart, Walgreens, Dollar General, Rite Aid, Ralphs, Krogers, and many other participating retailers.
- No overdraft or non-sufficient funds fee.
- $9.95 monthly fee for balances under $1,000
- $4.95 fee to load cash
- $2.95 out-of-network ATM fee
4 Account Features to Consider When Choosing a Checking Account for Bad Credit
Now that you know the ins-and-outs of checking accounts for bad credit, it’s time to find one that fits your financial needs. Here are four features to consider before opening a new account.
1. Monthly service fees
The last thing you want is money eaten up in bank fees. But unfortunately, when you have bad credit, a monthly service fee may be mandatory unless you meet certain criteria. For example:
- Meet the minimum balance requirement. Most banks allow customers to avoid fees by keeping their balance above a certain amount.
- Enroll in direct deposit. It’s common for banks to waive the monthly service fee when customers sign up for direct deposit.
- Open a savings account. A bank also might waive fees for customers who have multiple accounts under the same roof.
2. No Minimum Balance Requirements
Avoid accounts that require a minimum balance. Look for a bank that does not require you to keep a certain amount of funds in your checking account. That way, you won’t have to worry daily about dipping below the minimum and getting hit with fees.
3. Free Perks
Banks want your business and are willing to compete for it with free checking account perks. Cashback rewards are an excellent perk some checking accounts offer. Some banks offer unlimited cash back rewards for purchasing everyday items like gas and groceries. ATM reimbursements is another excellent perk offered by some banks. That means you can count on getting your money back for practically any ATM charge.
4. Mobile Banking
Mobile banking gives customers a convenient way to connect with their bank. Mobile banking also gives banks an opportunity to create a closer banking relationship with their customers. If you’re one of the 81 percent of U.S. adults who own a smartphone, you could probably benefit from mobile banking. Having the ability to see your account in real-time, receive account alerts and deposit checks can be a big help in successfully managing a checking account.
5 Bad Credit Resources to Help you Get Back on Track
Never ignore bad credit. 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.
But without good credit, you’re stuck using high-rate personal loans or payday if you need to borrow money. Paying an extra deposit if renting an apartment, or flat-out being denied.
Bad credit can make it harder to get car and home loans, and to qualify for credit card accounts. Plus people with lower credit scores generally pay more for auto, renter’s, and homeowner’s insurance.
1. Credit Cards. Credit cards managed the right way can boost your credit scores in less than 6 months. Make only small purchases and pay them off immediately, before the due date.
That means if you normally use cash for things like groceries or gas, use the credit card for those items then pay the credit card in full. Here are a few credit cards that are fairly easy to get:
- The OpenSky® Secured Visa® Credit Card has its positives and negatives. There is no credit check required to apply, but you’ll pay a $35 annual fee.
- The First Digital Mastercard® is designed to help overcome credit issues; you may be approved even if you’ve been declined elsewhere. This card helps you build your credit history and reports to all three major credit bureaus every month.
- The Total Visa® Card has an initial credit line of $300, but you are eligible for an increase after 12 months. A checking account is required.
2. Credit Builder Loans. Credit builder loans are designed to help consumers build or rebuild credit by holding an amount borrowed in a savings account while you make payments that are reported monthly to the major credit bureaus. Once you have paid off the loan, the money is yours. The Self Lender Credit Builder Loan makes qualifying simple:
- Self Lender will open a credit builder loan by opening a certificate of deposit (CD) account in your name (this CD will be opened with Sunrise Bank, Lead Bank, or Atlantic Capital Bank).
- You can choose to pay $25, $48, $89, or $150 per month.
- There are two options to pay the loan in either 12 or 24 months.
- You’ll also pay interest on your “loan” at a rate that ranges from 10.34% – 13.16%, depending on your loan amount.
- Payments are reported to the major credit bureaus which helps to build your credit history.
- During your loan term, you build a nice savings in your CD that you’re free to cash in at the end of the loan term.
3. Personal Loans. Unsecured personal loans for bad credit may cost you more due to higher interest rates; but, having a personal loan on credit reports can improve scores. Personal loans can enhance your credit history and your credit mix.
A blend of installment debt (personal loan) and revolving debt (credit cards) can benefit your credit scores. Personal loans for bad credit can also be used to pay down debt.
4. Credit For Utilities. Experian Boost lets consumers get a positive payment history from accounts that don’t normally appear on your credit report. The types of bills reported with Experian Boost include:
- Cell phone
- Streaming service bills, like Netflix.
Experian Boost makes it possible to add monthly utility and other bills you pay to your report. While Experian Boost only works for your Experian credit report, letting you benefit from additional positive payment history that can improve at least one of your credit scores.
5. No credit check card. Until now, there have not been many credit cards that don’t rely on credit scores for approval. The few no credit check credit cards that exist typically have some limitations and high membership fees. They are more like guaranteed approval credit cards that can only be used at a specific retailer.
However, the new X1 Visa Credit Card sets your credit limit based on your income, not your credit score. It features competitive rewards. Cardholders will earn 2 points per dollar — or 3 points per dollar if you spend $15,000 or more in a calendar year. If you refer a friend to the card, you can unlock a higher 4x rewards rate.
Additionally, many of you already know about the shopping card trick that allows you to apply for primarily retail cards with no hard inquiry on credit reports. It’s still an easy way to raise credit scores fast by using credit accounts to report on-time payments.
Reduce the amount of debt you owe to improve bad credit
The balance of your debt related to your available credit contributes 30% to a FICO Score’s calculation. This is referred to as “utilization.” Using less of your available credit can actually raise credit scores. Here are a few tips to keep in mind.
- Keep balances low on credit cards and other revolving credit: Outstanding debt will negatively impact a credit score. Experts suggest using 30% or less of your available credit limit. For even better credit scores, using 10% or less of available credit is what people with excellent credit scores practice.
- Pay off debt: Paying down credit card debt is one of the most effective ways to improve your credit scores. Check out tips to get out of debt to save thousands.
- Never close unused credit cards. Credit scoring models reward you for having a long credit history as well as for using only a small portion of your available credit limit. Keep unused credit cards open so that you benefit from a longer average credit history and a larger amount of available credit.
- Don’t open several new credit cards you don’t need: If your credit report reflects nothing but negative account, then adding positive credit accounts will help rebuild your credit history. But if you don’t need new credit to help your score, keep credit inquiries to a minimum.
Check out what other factors make up a credit score.
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 United States.
Mistakes happen. Many people don’t know how to manage a checking account until they make a mess of it.
How to manage a checking account is typically not taught in school or by your parents.
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.