There have been several people I know who have wanted the convenience of checking, but couldn’t open a new account due to bad credit. The past recession has left many to deal with damaged credit everywhere you look. But all may not be lost even if you happen to be in this boat. You can always do what you can to prop up your credit and take steps to improve your credit score. But I won’t sugarcoat it: it’s going to take some sacrifice.
Now if you aren’t able to open a checking account due to having bad or no credit (believe it or not, you could get turned down by regular banks because of your credit!), there are still some alternatives for you. An option would be to check out what your local credit union has to offer. But in terms of products, you may have heard of prepaid debit cards that are now being packaged or linked with checking or savings accounts. This may be an option you can investigate if you desire to use an account for your needs. Here are some alternatives to regular checking accounts:
Account Options For People Who Have Poor Credit
1. Prepaid Debit Cards and Checking Accounts
One thing I’ve appreciated about my local checking account is the debit card. A lot of the bank products I’ve seen that don’t require credit checks fall in the debit card account category. And maybe that’s a good thing, as this type of account combines the convenience of using a card with a bank account.
iBankUP Prepaid Account
If you’re seeking a debit card, then something like iBankUP might be a good fit for you. It’s a prepaid reloadable Visa card that comes with money management and banking features. With this card, you’ll have free direct deposit — it’s perfect for your paychecks or for those times when friends and family want to send you money. And the good news? It doesn’t require a credit check.
You’ll also have the ability to refill your card with MoneyPaks from Green Dot retailers. These MoneyPaks are available from familiar retailers like Walmart, Kroger, and Walgreens, among others.
More iBankUP Benefits
When you want to track your balance, you can check it online. Since this balance reflects real-time activity, you won’t have to contend with waiting for transactions from a week ago clearing. Also, because this is a prepaid debit card, you’re not going to get stuck with considerable overdraft fees. Instead of facing a $35 charge for a minor mistake on a regular checking account, any transaction that tries to go over your balance will simply be declined. So basically, it’s harder to get in over your head this way.
Since this is a Visa card, you can use it wherever Visa’s accepted, whether you use it locally or abroad. When you need cash, take the card to an ATM card that accepts Visa and you’ll be able to withdraw what you need. There’s a small decline fee at ATMs, though, so you might want to check your balance before attempting to take out any cash.
When you need to write a check, you can use the Virtual Checkbook online. Fill in the information, and iBankUP will cut the check for you, then mail it. You won’t be able to bounce checks here, because the company won’t cut it unless you can cover it. It’s sort of like having a virtual bookkeeper on your financial team. Depending on your status, the first check of the month may be free, but the checks after that will cost $2.00 each. However, that fee includes the mailing cost.
As far as monthly fees go, you’ll pay $0.99 per month if you load a minimum of $500 onto the card each month (the regular fee is around $5 a month). All their fees are of course, subject to change.
Mango Your Money
Another alternative to regular checking accounts is the Mango Prepaid Debit Card. Like iBankUP, it doesn’t require a credit check and gives you a lot of benefits. Instead of a Visa, this one’s a MasterCard. There’s a $5 per month fee that you can bypass by loading your card with $500 per month.
You can load the card from a Green Dot MoneyPak, via Direct Deposit, from a bank account, online with another Mango customer, or through your mobile phone.
It’s only $.50 each time you send money via SMS. This can be a handy way to manage pooled expenditures like utility bills split with roommates, for example. If you want to use your Mango card at an ATM, you’ll pay $2 to withdraw cash and $.50 to check your balance. You can read more about this card in our Mango Money MasterCard Prepaid Card review.
2. Second Chance Checking Accounts
Although your bad credit or lack of a credit history might impede you from opening a regular free checking account, you still might be able to access a second chance checking account. Such an account may be available through local banks or online banks. Unlike regular accounts, a second chance checking account may limit your check writing privileges or require a deposit.
So where can you find such accounts? You can start by checking out the offerings of well known banks and financial institutions. While your local bank may not offer this type of product, there may be online banks that do. You’ll want to do some research on this, as not all accounts are administered in the same fashion. In addition, some of these banks may allow you to open a regular checking account even if you have credit-related issues, but you may need to meet specific requirements to qualify.
A second chance checking account may offer features that are similar to those of ordinary checking accounts such as checkwriting, ATM cards, online banking, bill pay, direct deposits and linked debit cards. A particularly good account may also help you recover from your credit issues. But be aware as well, that there are some downsides. For example, there may be restrictions applied to checkwriting and ATM use, or there could be a minimum deposit that’s a little higher than with regular accounts. There may also be monthly costs. This is typically a consequence of having less than stellar credit: many things are more expensive because of the additional risks presented by a customer with poor or no credit.
If you want an alternative to carrying around a lot of cash, you still have choices. Even if you’ve had problems because of bad or no credit, it may still be possible for you to enjoy the benefits of different bank products. Look into one of the products I mentioned or stop by your local bank to discuss the possibilities. Just be sure you understand the fee schedule as well as the terms and conditions before you open an account.
Created October 4, 2010. Updated August 29, 2012. Copyright © 2012 The Digerati Life. All Rights Reserved.