Categories
Banking

Second Chance Banks Near me

We will discuss second chance banks near me and banking options for individuals with bad credit or with no credit. In addition, we will explain how credit works, improve your credit score and better understand money.

In the modern banking era, it is easy for individuals to fall behind or make mistakes with money. For example, if a person misses a payment on a loan or over-drafts their bank account, there can be serious consequences. Furthermore, your credit and ability to borrow money can be damaged. As a result, it is important to understand how to avoid the negative consequences that lead to using a second chance banks near me.

However, for those that need a helping hand to get back on their fiscal feet, many banks and lenders have become a second chance bank. Historically, lenders were hesitant to work with individuals who had bad credit or a history of bad financial decisions, like charge offs or loan defaults. However, today the financial world is changing rapidly. Furthermore, lending is becoming less decentralized and more competitive. As a result, bank customers who are searching for a second chance banks near me have more options.

What is a Second Chance Bank?

Offering credit and banking options to those who may have made some financial mistakes in the past is what second chance banks near me is all about. If your credit is bad or you have bankruptcy in your past, a second chance bank is an option for you. Moreover, if you are willing to do the work, second chance banks near me may be an opportunity to improve your credit and move up in life.

Crypto Passive Income Money

Lenders and Borrowers Have Different Ideas of How Much to Borrow; Easy Credit and Low Interest Rates Have Made Borrowing Easy

Often, families struggle to pay off debt or even make minimum payments on their debt. People lose jobs, get divorced or encounter other financial hardships that make it difficult to continue debt payments. Not being able to make payments can make you feel like you are drowning in debt. However, second chance banks near me may be an option for you in this situation.

When a person initially borrows money for a house or a car, they make an estimation of what they can afford. For example, if you make $35,000/year and you have other bills, you know that you probably shouldn’t borrow $120,000 for a new Ferrari sports car. This amount of debt would be beyond your ability to re-pay.

However, in the 21st century, lenders have made borrowing larger sums of money much simpler and easier. Record low interest rates and low barriers to credit have made borrowing money a dicey game. On the one hand, sales people who work for lenders frequently benefit from making more loans to clients, whether the client can re-pay the debt or not. Yet, clients may be unaware of the difficulty of repaying the loans because of the loan terms or changing circumstances.

Potential Second Chance Banks Near Me List:

  • OneUnited Bank
  • BBVA
  • Chime
  • Axos
  • GoBank Online Checking
  • Bank of America
  • Wells Fargo
  • First American Bank
  • Radius Bank
  • Fifth Third Express Banking
  • Aspire Federal Credit Union

Many of the banks on the second chance banks near me offer reasonable fees, free perks and more. However, keep in mind that some of them have drawbacks, like high overdraft fees and monthly service charges. Do your research before signing up for an account.

Regarding second chance banks near me, it is important to note that you still may have difficulty for some time if your credit is bad or you have a bankruptcy. Bad credit history tends to follow people around for years. In addition, second chance banks near me won’t magically fix your problems; however, what a second chance bank can do is give you the opportunity to make better financial decisions. Also, if you are responsible and make payments on time while paying down debt, your credit score will improve.

How Credit Cards Work

A credit card looks just like a normal debit card. It is a thin, rectangular piece of plastic that has “Visa” or “Mastercard” stamped on it. It is normally embossed with your credit card number. The number is usually approximately 16-digits. In addition, it also has an expiration date and a 3-digit verification number on the back of the card. Furthermore, your credit card can have a PIN number assigned to it for purchases, or it can simply be swiped. Clearly, when you learn about credit you should understand the power of the credit card. If you lose it or it is stolen, someone else can pretty easily use it, so guard it when you can.

Also, it is important to know that using a credit card to spend is easy and fun. However, paying the bill at the end of the month is not necessarily easy or fun. Furthermore, it is also important to understand that each time you swipe your credit card, you are borrowing money from the bank. If you understand debt and credit, then you understand that you must pay the money back to the bank, with interest. If you damage your credit significantly, you may not be eligible for second chance banks near me.

What is Credit?

Credit is simply a loan from a bank. It is easy to forget that you are borrowing money when all you have to do is swipe your card and purchase items. However, a credit card is just a line of credit extended to a credit card user for a loan. Moreover, in CREDIT you learn that credit card companies are in business to make money by collecting interest on your purchases. Finally, credit card companies love it when you have a revolving balance because you pay them interest each month, year after year.

Interest Rates and Compounding Interest

The second thing to know about CREDIT is that banks that issue credit cards make money from users by charging the users an interest rate. In addition, credit card users carry a revolving balance on their cards each month. Furthermore, this is simply the amount of money that users owe the bank at any given time during the month. The credit card issuer uses this revolving balance value to calculate your minimum payment. It also helps them determine how much interest you will pay. Finally, your interest rate determines exactly how much you are charged each month on the balance owed.

For this CREDIT example, let us say that you spent $100 on a credit card shopping spree. To simplify the example, we will assume that the interest rate charged on the card is 15%. Specifically, after the purchase, you will receive a bill from the credit card company indicating that your balance is $115 ($100 + $15 in interest). Obviously, this is an over-simplified example. But you get the picture.

Thirdly, another important concept to get when thinking about CREDIT is compounding interest. Consequently, compounding interest is when the interest on a balance begins to snowball and grow faster and faster over time. For example, in the above example, you accrued $15 in interest in the first month. In contrast, if you didn’t pay toward the balance, then in month number two, you would owe $115 plus 15% more interest ($115 + $17.25 = $132.25). Again, this is over-simplified to help you understand interest rates. If you miss a payment, there would also be a late fee and your interest rate might increase as well!

Monthly Payments, Minimum Payments and Fees

The third thing to know regarding CREDIT is payments and fees on credit cards. Each month, credit card users must make a payment to their credit card balance if they have a revolving balance. Moreover, this means that if you purchased something last month using your credit card, then you must pay towards that balance using real money from your bank account. Normally, the credit card company asks you to make a minimum payment. The minimum payment is usually around 2% of the revolving balance. However, in many cases, if your revolving balance is low, then a baseline minimum payment will apply. Normally, this is $25-45 each month.

When considering the basics of CREDIT, consider that fees usually apply to credit cards. It is common for some credit cards to charge an annual fee, especially if the card advertises member benefits, such as frequent flyer miles or cash back. In addition, there are fees to penalize you for not making payments, or being late on payments. As a result, getting late payment fees can really add up and hurt you by increasing your balance, driving up your interest rate and freezing your credit line.

Credit Scores and Ratings

When discussing credit scores, there is a numerical range that most creditors use to rank borrowers. Moreover, the numerical range of credit scores is typically between 300 to 850. Specifically, a score of 300 is the lowest score and 850 is the highest credit score. Otherwise, if you have no credit history than you will not have a score. The FICO Credit Scoring model is the most common scoring system used by lenders. Obviously, if your score is low, then you will need the help of second chance banks near me.

Where do Credit Scores Come From?

One thing to know when learning CREDIT is where credit scores come from. Namely, there are three primary credit bureaus that track credit information. The credit bureaus are Equifax, Experian and TransUnion. Consequently, these credit bureaus consolidate your credit information, such as each debt you have and the amount of money you owe. As a result, lenders use one or more of these credit bureaus to determine whether to lend money to borrowers.

There are 3 major things that you need to remember when learning how to build credit:

  • Always make payments on time
  • Never use more than approximately 30% of your available credit
  • Monitor your credit score closely each month

Always Make Loan Payments on Time

One of the most powerful things that you can do learning CREDIT is to make payments on time. The credit reporting agencies track whether each payment you make on your loans, credit card, etc. are on time. If your payments are reported as late to the credit reporting bureaus it can hurt your credit score significantly. So, always make payments on time. One simple trick to make sure that payments are made on time is to have the payments automatically drafted from your bank account each month.

Never Use More Than Approximately 30% of Your Available Credit

Second, when learning CREDIT, you should never utilize more than 30% of your available credit. For example, if you have a credit card with a $1,000 limit, then you should never allow the credit card balance to exceed $300. The credit reporting bureaus like to know that you have credit but you are not using too much. In many cases, if a person utilizes all or the majority of the credit limit that is allowed, it can be difficult to pay back. In addition, remember that you are trying to build a positive credit history. To do this requires discipline and will power.

Monitor Your Credit Score

Finally, throughout the process of learning CREDIT, you must monitor your personal credit score. There are businesses and credit cards that will provide this information for free. Moreover, there are also companies that specialize in monitoring and protecting your credit. In addition, the Federal Trade Commission (a government agency that regulated credit) can help you obtain resources for monitoring your credit.

How to Build Credit

When it comes to credit scores, you should know that building credit is slow. Accordingly, there are several things you should know about credit scores. First, you should know that it takes time to build good credit. Getting good credit can take many years. In addition, achieving an 800 or greater credit score typically takes many years.

Here are some additional tips for how to build and improve your credit along the way.

Budget Planning Process

Establish a Credit History

Unfortunately, to have credit you must establish credit. When you have little or no money and you are just starting out, most lenders don’t want to lend to you. However, there are some options for you to consider. Specifically, here are some suggestions for how to build credit.

Get Started Building Credit with Small Debt like Credit Cards or Borrowing with a Cosigner

First, to start establishing a credit history you can have a friend or family member cosign a loan for you. Namely, a cosigner is someone who already has good credit and who will sign a lending contract with you. Moreover, the cosigner acts as a sort of backup or a supporter for you in the lending contract. Banks and lenders like cosigners because they have an established track record for borrowing. In addition, the lender will assess the cosigner’s credit prior to lending to you both. If, for some reason, you are unable to re-pay the loan to the lender, the cosigner is responsible for paying the remainder of the loan.

Second, you can apply for a credit card. Furthermore, many credit card companies will lend to those who have little or no credit history. Specifically, credit card companies are willing to take the risk of lending to new borrowers because the interest rates for these credit cards are typically pretty high. Of course, high credit card interest rates make lending very profitable for banks and credit card companies.

Although your first credit through a credit card or other debt will be minimal, you will have the opportunity to begin building your credit score. For example, your first debt will be like planting a seed; you must water it and take care of it for it to grow into something bigger.

Credit Card Hack: Authorized User

Another option is to become an authorized user on someone else’s credit card. For example, if you father, mother, sister, brother or other family member has a credit card, you can request for them to add you as an authorized user on the card. Most credit cards will report each month’s activity to the credit reporting bureaus. In turn, this reporting will include your name and begin establishing a positive credit history for you. However, it is important that if you become an authorized user on someone else’s card, that you choose someone with good credit and who will make on time payments. Otherwise, their bad behavior will negatively affect your credit history.

Finally, you may be able to secure a student loan if you are attending college. Some loans may allow you to sign for the loan by yourself. Other loans may require you to have a co-signer or co-borrower. If you are able to secure student loan debt it can boost your credit score in the long run and help you build up your credit. However, keep in mind that student loans must be paid back. Laws have changed in recent years and most student loans cannot be discharged in bankruptcy. As a result, you will pay back the loan whether you like it or not.

Take on Healthy Levels of Debt

Most people know that when you borrow money, there is a limit to how much you can borrow. Moreover, lenders make the decision to lend to a borrower based on credit score, credit history earning power (income) and debt-to-income ratio. However, one little secret that many people don’t know is that not only can you have too much debt, but you can also have too little debt!

When you are trying to achieve a tier 1 credit score, many creditors like to see that you have some debt. In addition, creditors want to see that you are consistently making payments towards that debt. The financial industry has the expectation that most people will carry debt. People buy homes, cars and even have credit card debt. However, if you pay your debt off two quickly, it may hurt your credit score.

marriage debt

Maintain Revolving Credit

When considering paying off debt completely, think again. Paying off debt is an admirable goal. However, consider that your credit score may go down if you pay off all your debt. In contrast, one option for you when debt is paid is to maintain revolving credit. For example, you can use a credit card each month for purchases. Furthermore, you can use the credit card to pay for normal expenses like groceries and gas. Then, at the end of each month, pay the balance owed. As a result, your credit report should respond positively to consistent, timely payments. And you will have the satisfaction of knowing you are staying debt free.

Pay Bills Consistently

As stated before, when you are figuring out how to build credit, you will need to consistently pay down debt over the length of the loan. For example, if you have a car payment set up for 60 months, then be sure to pay at least the minimum payment on time each month for the majority of the loan. Furthermore, don’t miss payments and be consistent. Finally, if you decide to pay off your loan a little early, that is ok too.

A Word of Warning

There are Inherent Risks with Borrowing and Debt Must be Repaid

It’s important to understand the potential repercussions of credit cards. In fact, borrowing money is always risky business, whether it’s through a credit card, loan or line of credit. Sometimes accepting the money seems harmless. Furthermore, you may be exacerbating your financial problems by taking on more debt. In short, heed the warning that debt must be paid back, including interest on a time schedule.

In addition, understand that borrowing money can place pressure on your assets with liens or other legal instruments. Consequently, in the event that you are unable to make your payments, the lender can take your asset, such as a home or car. When you borrow more money, you also take on more financial risk and stress.

Second Chance Banks Near Me Wrap Up

Hopefully this article has helped you appreciate that second chance banks near me may be an option for you. In addition, we have laid out some information about personal finance, banking and credit. Partnering with the right second chance bank can help you get back on the right financial track if you have the discipline to follow through.

Read More:

Drowning in Debt

What is Tier 1 Credit

10 Things to Know Before Starting a Budget

Debt Elimination

How Much Was a Dollar Worth in 1960?

The Best Budget App

Buyer’s Guide for Used Cars

The Best Budget App

Why Saving Money is Important

Financial Planning Services

Value Investing Books

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals, and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.

Categories
Banking

Best Banks For Startups

In this article we selected five banks in our list of the best banks for startups. Furthermore, there are lots of choices when it comes to selecting a small business bank to utilize mobile app banking, making and receiving commercial bill payments, securing small business loans, money transfers and lines of credit. As a result, we have narrowed the list for you of small business banks that are reputable, offer great technology solutions and can meet the needs of a small business.

  1. BBVA Bank
  2. Chase Bank
  3. Axos Bank
  4. Citibank
  5. Bank of America

First, for your small business to be successful, cultivating a relationship with the best banks for startups is critical. Unfortunately, there are so many banks to choose from that the task of finding the right bank becomes daunting. First, ensuring that you find the banking partner that is the best fit for your business will play an integral role in promoting the growth of your small business. Finally, having the right connection to a bank can also see you through the tough times with lines of credit. In conclusion, these are all attributes that best banks for startups will have.

Ask Questions!

To help with the decision making process in finding the best banks for startups, we have developed some questions which you may find helpful in choosing the right bank for your small business.

How to Find the Best Banks for Startups: Questions to Ask Your Bank

First, does your small business require a line of credit or financing for expansion at some point in the future?
Second, will mobile banking (using an app on your phone) be your primary method of banking?
Third, do you need to conduct banking in person with a teller or manager?
Fourth, is paying monthly fees for banking or for transfers an issue for your business?
Finally, do you prefer to conduct banking activities at a bank which offers most services under one roof, or do you like to shop around for different financial products?

Furthermore, these questions should help you narrow down the best banks for startups.

Future Plans

As you develop answers to each question, keep in mind what your future plans are for your business. In addition, will you grow into a larger, more sophisticated business requiring new locations, more infrastructure and equipment, employees, etc.? Ideally, you want a bank that can meet your needs no matter what. In the meantime, it’s recommended that you find the best banks for startups that can meet your needs today and doesn’t over complicate your life.

Now, the good news is that there are many options for small business owners when it comes to finding the best banks for startups. Next, if you are not happy with your banking partner, you can easily and quickly replace the old one with a better choice that fits your business needs! Clearly, it is important to devote time to finding the best banks for startups.

Business Checking Interest Rates

Long term financial goals

One other quick note about your money and interest. Years ago, it was beneficial to maintain larger balances in your bank account to take advantage of interest that is earned on cash sitting in the bank. Unfortunately, interest rates are so low these days (near zero) that banks don’t usually even bother advertising the fact that your money can earn interest. So, don’t get your hopes up about earning much extra money from interest.

Without further ado, let’s get started looking for the best banks for startups.

CITIBANK:

Our first choice in the search for the best banks for startups is Citibank. It is known as an international bank hub but offers a user friendly interface for online banking. Moreover, Citibank offers four types of business checking accounts, based on your small business needs.

CitiBusiness Checking

Monthly fee: $24
Free monthly transactions: Unlimited
Minimum balance (maintenance fee required): 0

CitiBusiness Streamlined Checking

$15 monthly fee
Free monthly transactions: 250
Minimum balance: $10,000

CitiBusiness Flexible Checking

Monthly fee: varies by state
Free monthly transactions: 500
Minimum balance: $10,000

CitiBusiness Interest Checking

Monthly fee: varies by state
Free monthly transactions: 25
Minimum balance: $10,000

Citibank offers a lot of options: Mobile banking, checking tailored to small businesses, credit options and more.

BANK OF AMERICA:

Having been a major bank for a long time, Bank of America represents stability. Primarily, it offers state of the art mobile banking app, online banking and bill pay. In addition, they offer a debit card with security protection. Also, you can also maintain a business savings account. Finally, accounts offer the option to set spending limits and receive alerts for scenarios such as low balance or unusual activity.

Preferred Rewards

Additionally, note that Bank of America offers the Preferred Rewards for Business program. Merchant Services or Payroll Services are available (Business Advantage Checking only).

Business Fundamentals Checking: Essential tools for small businesses

Mobile Banking

Mobile Banking with mobile check deposit
Online Banking with account alerts and Bill Pay
Business debit cards with Total Security Protection
Business savings account
$16 or $0 per month

Bank of America Business Checking Options

Business Advantage Checking : Premium tools for large or growing businesses

All Business Fundamentals features
Easy Quick Books integration
Ability to grant and customize account access levels per employee
No-fee stop payments, incoming wire transfers and more
Additional business checking account included
$29.95 or $0 per month

Note: fees may apply to checking account for the following: minimum balances not met, wire transfers, account management, etc.

Small Business Banking Extras

Bank of America offers some nice Cash Management Tools for Small Businesses, including:

Payroll Services – ADP and Intuit tools for payroll
Remote Deposit Online – Deposit from home or office
Account Management – QuickBooks tool
Invoicing and Payments by Viewpost – Paperless invoicing and payments
Merchant Services – Electronic payment tool
Treasury Services for larger businesses – Control working capital through payment, receipt, liquidity, fraud and account solutions.

CHASE:

The Chase Bank is probably one of the most well-known banks offering debit cards and credit cards. First, it offers small business owners all of the high tech solutions of the 21st century needed to succeed and grow their business. In addition, the bank offers three business checking options:

Chase Total Business Checking

Monthly Service Fee: $15 OR $0 (fee can be waived if you meet requirements)

100 transactions per month at no charge
Unlimited electronic deposits
$5000 in cash deposits per statement cycle without an additional fee
Domestic and international wire transfers

Chase Performance Business Checking

Monthly Service Fee: $30 OR $0 (fee can be waived if you meet requirements)

250 transactions per month at no charge
Unlimited electronic deposits and incoming wires
$20,000 in cash deposits per statement cycle without an additional fee

Chase Platinum Business Checking

Monthly Service Fee: $95 OR $0 (fee can be waived if you meet requirements)
500 transactions per month at no charge
Unlimited electronic deposits and incoming wires
$25,000 in cash deposits per statement cycle without an additional fee

Furthermore, it’s important to pay attention to details with Chase, especially with fees and transaction volume.

Electronic Business Options

More importantly, Chase offers human resources and payroll programs for small businesses. Furthermore, your business can manage payroll (and payroll tax-filing) completely online. In addition, merchant services and mobile banking is smooth and user friendly from any mobile device. Next, deposit checks using your mobile phone. In addition, Chase has thousands of physical branches and ATMs nationwide.

Moreover, business savings accounts and debit cards for employees are an option. In addition, Chase Bank offers a variety of types of business loans including SBA loans and business lines of credit.

Finally, Chase Bank is famous for their offers of cash for opening a new account. Currently, Chase is offering $300 to new customers who open a Chase Total Business Checking® account with qualifying activities.

AXOS:

Axos Bank is the oldest digital bank in the U.S. and offers some innovative technology solutions that are a step ahead of the competition. Moreover, with new features such as biometic identification and peer-to-peer payments, Axos is on the cutting edge of banking technology. Furthermore, Axos Bank offers two primary options for business checking accounts.

Axos Business Checking Options

Basic Business Checking

For businesses with moderate account activity.
No minimum deposit
No monthly fees
$1000 minimum deposit to open account
Online banking and bill pay
Up to 200 free monthly debits, credits and/or deposits

Business Interest Checking

For companies looking for a place to store larger cash reserves in interest-yielding accounts
$5,000 minimum average daily balance
$10 monthly fee
$100 minimum deposit to open account
Online banking and bill pay
Unlimited ATM reimbursements
Up to 60 free monthly remote deposits
Earn interest on balances

Features

Above all, Axos Bank offers a ton of features that we expect in the 21st century. Unfortunately, although the Axos banking app gets positive reviews, the Axos Business app received two stars on the App Store. But, if your business doesn’t use the mobile app for banking, Axos is still an affordable and reasonable option. Finally, Axos is also known for competitive rates for savings accounts. Rates vary so you have to check daily for changes.

BBVA:

The Best Small Business Checking Account 2020

Another great choice in the search for the best banks for startups is BBVA. It is a growing bank that caters to small business owners. They offer options for small businesses such as checking accounts, savings accounts, lending/loans, credit cards and other merchant services.

Depends on Where You Live

One important caveat that you should know about BBVA regarding where you live. For example, BBVA only offers business checking accounts in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. As a result, BBVA recommends that If you don’t live in one of these states, Azlo might be an option worth exploring. Unfortunately, Azlo recently stopped accepting new accounts.

If you live in one of the states listed above, here are your business checking options at BBVA:

BBVA Business Checking Options

BBVA Business Connect Checking

No monthly Service Charge
Up to $5,000 in cash processing per month
Unlimited debit card and ATM transactions at no additional charge1
Total of five processed checks and in-branch withdrawals2 and two in-branch deposits3 processed per month at no additional charge
Lastly, No BBVA USA fee to use another bank’s ATM

BBVA Business Choice Checking

250 transaction items processed per month
Up to $10,000 in cash processing per month
Three business Visa® debit cards you can customize for your business, at no additional charge
Online Banking, Mobile Banking, account alerts, and unlimited Bill Pay, at no additional charge
$100 minimum opening deposit
Monthly Service Charge: $15
Finally, Add 2 premium features (such as additional transactions/processeing and more)

BBVA Business Choice Checking

One free wire per month
Earn interest on balances
500 transaction items processed, plus up to $25,000 in cash processing per month
One Overdraft Fee Forgiveness Refund per year
50% discounted checks (including tax and shipping)
Monthly Service Charge: $25
No BBVA USA fee for using an ATM in or outside of the BBVA USA ATM network

Affordable Option

In terms of affordability, BBVA is one of the best banks for startups. Furthermore, BBVA is a great option for truly small businesses because when you’re just getting started in business, the last thing you need is to be nickeled and dimed by endless fees. In addition, BBVA has very few fees to start.

Next, debit card and ATM transactions are unlimited, so no fees to worry about here. Moreover, minimum of $100 deposit to start means you don’t have to break the piggy bank to open an account.

Finally, the premium accounts offer more flexibility tailored toward growing businesses with more transactions, earning interest on balances and the like.

For example, BBVA offers other options such as small business loans and debit cards for employees as well.

Wrap Up: Best Banks for Startups

In conclusion, hopefully this will help you narrow down your choice for best banks for startups.

Enjoy this article and want to learn more about money and budgeting. Check out our post entitled, “10 Things to Know Before Starting a Budget.”

Learn more about banking from the U.S. Securities and Exchange Commission.

Read More:

Value Investing Books

Best Gold Coins to Buy

Goldmine Stocks

How Much Savings You Should Have at 40

Wealth Building Cornerstones

Real Estate Market Predictions

Why Saving Money is Important

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.

Categories
Banking

Second Chance Bank

We will explain what a second chance bank is for individuals with bad credit or with no credit. In addition, we will explain how credit works, improve your credit score and better understand money.

In the modern banking era, it is easy for individuals to fall behind or make mistakes with money. For example, if a person misses a payment on a loan or over-drafts their bank account, there can be serious consequences. Furthermore, your credit and ability to borrow money can be damaged. As a result, it is important to understand how to avoid the negative consequences that lead to using a second chance bank.

However, for those that need a helping hand to get back on their fiscal feet, many banks and lenders have become a second chance bank. Historically, lenders were hesitant to work with individuals who had bad credit or a history of bad financial decisions, like charge offs or loan defaults. However, today the financial world is changing rapidly. Furthermore, lending is becoming less decentralized and more competitive. As a result, bank customers who are searching for a second chance bank have more options.

What is a Second Chance Bank?

Offering credit and banking options to those who may have made some financial mistakes in the past is what a second chance bank is all about. If your credit is bad or you have bankruptcy in your past, a second chance bank is an option for you. Moreover, if you are willing to do the work, a second chance bank is your opportunity to improve your credit and move up in life.

Lenders and Borrowers Have Different Ideas of How Much to Borrow; Easy Credit and Low Interest Rates Have Made Borrowing Easy

Often, families struggle to pay off debt or even make minimum payments on their debt. People lose jobs, get divorced or encounter other financial hardships that make it difficult to continue debt payments. Not being able to make payments can make you feel like you are drowning in debt. However, a second chance bank may be an option for you in this situation.

When a person initially borrows money for a house or a car, they make an estimation of what they can afford. For example, if you make $35,000/year and you have other bills, you know that you probably shouldn’t borrow $120,000 for a new Ferrari sports car. This amount of debt would be beyond your ability to re-pay.

However, in the 21st century, lenders have made borrowing larger sums of money much simpler and easier. Record low interest rates and low barriers to credit have made borrowing money a dicey game. On the one hand, sales people who work for lenders frequently benefit from making more loans to clients, whether the client can re-pay the debt or not. Yet, clients may be unaware of the difficulty of repaying the loans because of the loan terms or changing circumstances.

Potential Second Chance Bank List:

  • OneUnited Bank
  • BBVA
  • Chime
  • Axos
  • GoBank Online Checking
  • Bank of America
  • Wells Fargo
  • First American Bank
  • Radius Bank
  • Fifth Third Express Banking
  • Aspire Federal Credit Union

Many of the banks on the second chance bank list offer reasonable fees, free perks and more. However, keep in mind that some of them have drawbacks, like high overdraft fees and monthly service charges. Do your research before signing up for an account.

Regarding a second chance bank, it is important to note that you still may have difficulty for some time if your credit is bad or you have a bankruptcy. Bad credit history tends to follow people around for years. In addition, a second chance bank won’t magically fix your problems; however, what a second chance bank can do is give you the opportunity to make better financial decisions. Also, if you are responsible and make payments on time while paying down debt, your credit score will improve.

How Credit Cards Work

A credit card looks just like a normal debit card. It is a thin, rectangular piece of plastic that has “Visa” or “Mastercard” stamped on it. It is normally embossed with your credit card number. The number is usually approximately 16-digits. In addition, it also has an expiration date and a 3-digit verification number on the back of the card. Furthermore, your credit card can have a PIN number assigned to it for purchases, or it can simply be swiped. Clearly, when you learn about credit you should understand the power of the credit card. If you lose it or it is stolen, someone else can pretty easily use it, so guard it when you can.

Also, it is important to know that using a credit card to spend is easy and fun. However, paying the bill at the end of the month is not necessarily easy or fun. Furthermore, it is also important to understand that each time you swipe your credit card, you are borrowing money from the bank. If you understand debt and credit, then you understand that you must pay the money back to the bank, with interest. If you damage your credit significantly, you may not be eligible for a second chance bank.

What is Credit?

Credit is simply a loan from a bank. It is easy to forget that you are borrowing money when all you have to do is swipe your card and purchase items. However, a credit card is just a line of credit extended to a credit card user for a loan. Moreover, in CREDIT you learn that credit card companies are in business to make money by collecting interest on your purchases. Finally, credit card companies love it when you have a revolving balance because you pay them interest each month, year after year.

Interest Rates and Compounding Interest

The second thing to know about CREDIT is that banks that issue credit cards make money from users by charging the users an interest rate. In addition, credit card users carry a revolving balance on their cards each month. Furthermore, this is simply the amount of money that users owe the bank at any given time during the month. The credit card issuer uses this revolving balance value to calculate your minimum payment. It also helps them determine how much interest you will pay. Finally, your interest rate determines exactly how much you are charged each month on the balance owed.

For this CREDIT example, let us say that you spent $100 on a credit card shopping spree. To simplify the example, we will assume that the interest rate charged on the card is 15%. Specifically, after the purchase, you will receive a bill from the credit card company indicating that your balance is $115 ($100 + $15 in interest). Obviously, this is an over-simplified example. But you get the picture.

Thirdly, another important concept to get when thinking about CREDIT is compounding interest. Consequently, compounding interest is when the interest on a balance begins to snowball and grow faster and faster over time. For example, in the above example, you accrued $15 in interest in the first month. In contrast, if you didn’t pay toward the balance, then in month number two, you would owe $115 plus 15% more interest ($115 + $17.25 = $132.25). Again, this is over-simplified to help you understand interest rates. If you miss a payment, there would also be a late fee and your interest rate might increase as well!

Monthly Payments, Minimum Payments and Fees

The third thing to know regarding CREDIT is payments and fees on credit cards. Each month, credit card users must make a payment to their credit card balance if they have a revolving balance. Moreover, this means that if you purchased something last month using your credit card, then you must pay towards that balance using real money from your bank account. Normally, the credit card company asks you to make a minimum payment. The minimum payment is usually around 2% of the revolving balance. However, in many cases, if your revolving balance is low, then a baseline minimum payment will apply. Normally, this is $25-45 each month.

When considering the basics of CREDIT, consider that fees usually apply to credit cards. It is common for some credit cards to charge an annual fee, especially if the card advertises member benefits, such as frequent flyer miles or cash back. In addition, there are fees to penalize you for not making payments, or being late on payments. As a result, getting late payment fees can really add up and hurt you by increasing your balance, driving up your interest rate and freezing your credit line.

Credit Scores and Ratings

When discussing credit scores, there is a numerical range that most creditors use to rank borrowers. Moreover, the numerical range of credit scores is typically between 300 to 850. Specifically, a score of 300 is the lowest score and 850 is the highest credit score. Otherwise, if you have no credit history than you will not have a score. The FICO Credit Scoring model is the most common scoring system used by lenders. Obviously, if your score is low, then you will need the help of a second chance bank.

Where do Credit Scores Come From?

One thing to know when learning CREDIT is where credit scores come from. Namely, there are three primary credit bureaus that track credit information. The credit bureaus are Equifax, Experian and TransUnion. Consequently, these credit bureaus consolidate your credit information, such as each debt you have and the amount of money you owe. As a result, lenders use one or more of these credit bureaus to determine whether to lend money to borrowers.

There are 3 major things that you need to remember when learning how to build credit:

  • Always make payments on time
  • Never use more than approximately 30% of your available credit
  • Monitor your credit score closely each month

Always Make Loan Payments on Time

One of the most powerful things that you can do learning CREDIT is to make payments on time. The credit reporting agencies track whether each payment you make on your loans, credit card, etc. are on time. If your payments are reported as late to the credit reporting bureaus it can hurt your credit score significantly. So, always make payments on time. One simple trick to make sure that payments are made on time is to have the payments automatically drafted from your bank account each month.

Never Use More Than Approximately 30% of Your Available Credit

Second, when learning CREDIT, you should never utilize more than 30% of your available credit. For example, if you have a credit card with a $1,000 limit, then you should never allow the credit card balance to exceed $300. The credit reporting bureaus like to know that you have credit but you are not using too much. In many cases, if a person utilizes all or the majority of the credit limit that is allowed, it can be difficult to pay back. In addition, remember that you are trying to build a positive credit history. To do this requires discipline and will power.

Monitor Your Credit Score

Finally, throughout the process of learning CREDIT, you must monitor your personal credit score. There are businesses and credit cards that will provide this information for free. Moreover, there are also companies that specialize in monitoring and protecting your credit. In addition, the Federal Trade Commission (a government agency that regulated credit) can help you obtain resources for monitoring your credit.

How to Build Credit

When it comes to credit scores, you should know that building credit is slow. Accordingly, there are several things you should know about credit scores. First, you should know that it takes time to build good credit. Getting good credit can take many years. In addition, achieving an 800 or greater credit score typically takes many years.

Here are some additional tips for how to build and improve your credit along the way.

Establish a Credit History

Unfortunately, to have credit you must establish credit. When you have little or no money and you are just starting out, most lenders don’t want to lend to you. However, there are some options for you to consider. Specifically, here are some suggestions for how to build credit.

Get Started Building Credit with Small Debt like Credit Cards or Borrowing with a Cosigner

First, to start establishing a credit history you can have a friend or family member cosign a loan for you. Namely, a cosigner is someone who already has good credit and who will sign a lending contract with you. Moreover, the cosigner acts as a sort of backup or a supporter for you in the lending contract. Banks and lenders like cosigners because they have an established track record for borrowing. In addition, the lender will assess the cosigner’s credit prior to lending to you both. If, for some reason, you are unable to re-pay the loan to the lender, the cosigner is responsible for paying the remainder of the loan.

Second, you can apply for a credit card. Furthermore, many credit card companies will lend to those who have little or no credit history. Specifically, credit card companies are willing to take the risk of lending to new borrowers because the interest rates for these credit cards are typically pretty high. Of course, high credit card interest rates make lending very profitable for banks and credit card companies.

Although your first credit through a credit card or other debt will be minimal, you will have the opportunity to begin building your credit score. For example, your first debt will be like planting a seed; you must water it and take care of it for it to grow into something bigger.

Credit Card Hack: Authorized User

Another option is to become an authorized user on someone else’s credit card. For example, if you father, mother, sister, brother or other family member has a credit card, you can request for them to add you as an authorized user on the card. Most credit cards will report each month’s activity to the credit reporting bureaus. In turn, this reporting will include your name and begin establishing a positive credit history for you. However, it is important that if you become an authorized user on someone else’s card, that you choose someone with good credit and who will make on time payments. Otherwise, their bad behavior will negatively affect your credit history.

Finally, you may be able to secure a student loan if you are attending college. Some loans may allow you to sign for the loan by yourself. Other loans may require you to have a co-signer or co-borrower. If you are able to secure student loan debt it can boost your credit score in the long run and help you build up your credit. However, keep in mind that student loans must be paid back. Laws have changed in recent years and most student loans cannot be discharged in bankruptcy. As a result, you will pay back the loan whether you like it or not.

Take on Healthy Levels of Debt

Most people know that when you borrow money, there is a limit to how much you can borrow. Moreover, lenders make the decision to lend to a borrower based on credit score, credit history earning power (income) and debt-to-income ratio. However, one little secret that many people don’t know is that not only can you have too much debt, but you can also have too little debt!

When you are trying to achieve a tier 1 credit score, many creditors like to see that you have some debt. In addition, creditors want to see that you are consistently making payments towards that debt. The financial industry has the expectation that most people will carry debt. People buy homes, cars and even have credit card debt. However, if you pay your debt off two quickly, it may hurt your credit score.

Maintain Revolving Credit

When considering paying off debt completely, think again. Paying off debt is an admirable goal. However, consider that your credit score may go down if you pay off all your debt. In contrast, one option for you when debt is paid is to maintain revolving credit. For example, you can use a credit card each month for purchases. Furthermore, you can use the credit card to pay for normal expenses like groceries and gas. Then, at the end of each month, pay the balance owed. As a result, your credit report should respond positively to consistent, timely payments. And you will have the satisfaction of knowing you are staying debt free.

Pay Bills Consistently

As stated before, when you are figuring out how to build credit, you will need to consistently pay down debt over the length of the loan. For example, if you have a car payment set up for 60 months, then be sure to pay at least the minimum payment on time each month for the majority of the loan. Furthermore, don’t miss payments and be consistent. Finally, if you decide to pay off your loan a little early, that is ok too.

A Word of Warning

There are Inherent Risks with Borrowing and Debt Must be Repaid

It’s important to understand the potential repercussions of credit cards. In fact, borrowing money is always risky business, whether it’s through a credit card, loan or line of credit. Sometimes accepting the money seems harmless. Furthermore, you may be exacerbating your financial problems by taking on more debt. In short, heed the warning that debt must be paid back, including interest on a time schedule.

In addition, understand that borrowing money can place pressure on your assets with liens or other legal instruments. Consequently, in the event that you are unable to make your payments, the lender can take your asset, such as a home or car. When you borrow more money, you also take on more financial risk and stress.

Second Chance Bank Wrap Up

Hopefully this article has helped you appreciate that a second chance bank may be an option for you. In addition, we have laid out some information about personal finance, banking and credit. Partnering with the right second chance bank can help you get back on the right financial track if you have the discipline to follow through.

Read More:

Drowning in Debt

What is Tier 1 Credit

10 Things to Know Before Starting a Budget

Debt Elimination

How Much Was a Dollar Worth in 1960?

The Best Budget App

Buyer’s Guide for Used Cars

The Best Budget App

Why Saving Money is Important

Financial Planning Services

Value Investing Books

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals, and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.