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The Top 7 Second Chance Bank Accounts

Some banks don’t like giving second chances to customers who have less-than-stellar financial histories, especially since it could expose them to expensive risks. A record of bounced checks or debit card overdrafts could easily lock you out of the conveniences of modern banking.

Fortunately, banks also like making money, and some offer special “second chance” accounts that minimize their risk while allowing consumers to stay in the banking system. A second chance bank account gives customers with troubled records a fresh opportunity to demonstrate they can bank responsibly.

When it comes to a second chance account, fees are an unfortunate reality. But some accounts offer customers a better deal than others, and we’ve researched our database to find the second chance accounts with the most reasonable fee structures, while also factoring in whether they provide online and mobile banking, and how accessible accounts are throughout the country.

Account Name

Monthly Fee

Minimum to open

Availability

Chime$0$0Nationwide
Peoples Bank Cash Solutions Second Chance Checking$4.95$30Nationwide
Radius Essential Checking$0$10Nationwide
Wells Fargo Opportunity Checking and Savings Accounts$10, can be waived if you meet requirements$25All 39 states (plus Washington D.C.) that has a Wells Fargo location.
BBVA Easy Checking$13.95$25Nationwide, with the exception of Alaska and Hawaii
Woodforest National Bank Second Chance Checking$9.95 monthly maintenance fee if you use a direct deposit; $11.95 without a direct deposit$25Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia
First National Bank and Trust Company Renew Checking$9.95; $7.95 with direct deposit$25Select areas of Wisconsin and Illinois

Second chance account basics

With a second chance bank account, customers shut out of traditional bank accounts get the opportunity to win their way back into a bank’s good graces. Similar to credit bureaus, financial services company ChexSystems maintains records of consumers’ banking histories. Bounced checks, overdrawn accounts or instances of fraud can all end up on your ChexSystems record; if you accumulate enough black marks on ChexSystems, banks could deny your application to open a new account.

Because second chance accounts are meant for customers who have demonstrated bad banking behavior, some lack features of traditional accounts, such as overdraft protection. In the eyes of the bank, you represent too much of a risk for them to extend you such courtesies.

Nobody likes paying fees, and we generally advise consumers to avoid needless banking fees due to the many fee-free banking options available. But fees are the price you pay for access to banking when you have a poor record. Plus, the second chance accounts listed below give you access to online and mobile banking, which is always a plus.

The 7 best second chance bank accounts

1. Chime

Chime

Fintech app developer Chime is not a bank, however their online checking account product is open to everybody no matter how bad your record is with ChexSystems. Chime does not check on applicants with ChexSystems, plus they offer lots of non-traditional features to help you get your financial life back on track. Best of all is the fact that they charge no fees at all, and require neither a minimum opening deposit or a minimum balance.

Chime account features:

  • No opening balance or minimum balance requirements.
  • Set up direct deposit for your paycheck, and the funds from each pay period will be deposited as soon as the transaction is initiated, giving you access to your pay up to two days earlier than conventional checking accounts.
  • Automatic savings features to help you save in your connected Chime Savings account.
  • The app sends you daily bank account balance notifications, and sends transaction alerts every time you use your debit card.
  • You can disable the debit card from the app.
  • Send 15 fee-free “friend transfers” P2P payments each month.
  • Nominal 0.01% APY on all deposits.

Fees to watch out for:

  • Chime’s service is almost entirely fee-free: No monthly charges, no ACH transfer fees, no foreign transaction fees, and no ATM fees if you withdraw funds from MoneyPass or Visa Plus Alliance network ATMs.
  • If you make an ATM withdrawal outside of these networks, there is a $2.50 fee.
  • Overdrafts are not permitted, so there is never an overdraft fee.

LEARN MORE Secured

on Chime’s secure website

Member FDIC

2. Peoples Bank Cash Solutions Second Chance Checking

Peoples Bank Cash Solutions

This Texas-based bank offers a second chance bank account that is available nationwide, and so long as you don’t have a record of bank or checking fraud on your record, you should be approved for this account. You’ll need to deposit at least $30 before the bank activates your account and provides you with checks and a debit card.

Fees to watch out for:

  • $4.95 monthly maintenance fee
  • $27.50 overdraft fee
  • $27.50 nonsufficient funds fee
  • $3.95 printed statement fee (which can be avoided with electronic statements)
  • $2.00 ATM withdrawal fee at machines not owned by Peoples Bank
  • $25 stop payment fee
  • $20 account closure fee (if within 90 days of opening account)

LEARN MORE Secured

on Peoples Bank Cash Solutions’s secure website

Member FDIC

3. Radius Essential Checking

Radius Bank

Products from online bank Radius are available to customers nationwide, and accessibility is a strong point in its favor. This second chance bank account only requires customers to deposit $10 to open an Essential Checking account, which is lower than some other accounts on this list.

Account Features:

  • A free debit card
  • 24/7 mobile and online banking
  • Access to Radius’s budgeting and personal finance tracking apps
  • Eligibility to upgrade to Radius’s Reward Checking account after 12 months of positive banking history

Fees to watch out for:

  • $9 monthly maintenance fee
  • $25 per item non-sufficient funds fee (waived on all overdraft items $5 or less)
  • $5 daily overdraft fee

LEARN MORE Secured

on Radius Bank’s secure website

Member FDIC

4. Wells Fargo Opportunity Checking and Savings Accounts

Wells Fargo Bank

Wells Fargo’s Opportunity Checking and Savings Accounts are tailor-made for folks with a lackluster credit or banking history. With a $25 opening deposit, you’ll get access to a second chance bank account that offers most of the bells and whistles of a traditional bank account. The account does come with a monthly fee, although it’s possible to waive it if you meet a few requirements (see below).

Account features:

  • $25 minimum deposit to open
  • Free transfers are available between Opportunity Checking and Savings accounts
  • You can choose to opt into overdraft protection
  • Free access to bill pay
  • “My Spending Report with Budget Watch” is available if you want to pay extra attention to where your money is going
  • Free debit card with access to more than 13,000 Wells Fargo ATMs throughout the country

Fees to watch out for:

  • $10 monthly service fee, waived if any of the following are true:
    • You make 10 posted debit card purchases or payments
    • You keep a minimum daily balance of $1,500 in the account
    • You receive $500 total in direct deposits each statement cycle
  • $35 overdraft and returned item fee
  • $12.50 overdraft protection transfer fee
  • $15 fee for excess activity (exceeding withdrawals from your savings account)
  • 3% foreign transaction fee with your debit card
  • $5 for money orders
  • $31 for stop payments

LEARN MORE Secured

on Wells Fargo Bank’s secure website

Member FDIC

5. BBVA Easy Checking

BBVA
BBVA’s Easy Checking product is available as a second chance account to customers in the Lower 48 (sorry, residents of Alaska and Hawaii, you’ll have to look elsewhere). Note that you must open the account at one of the bank’s branch locations, or by phone outside of the branch network footprint; you cannot open this account via their website. There is a $13.95 monthly service charge to maintain the account. You can request that BBVA upgrade your account one of their regular checking products after 12 months — and ditch that high monthly fee — so long as the Easy Checking account remains active and has a positive balance.

BBVA Easy Checking features::

  • Online and mobile banking, customized alerts, and a free debit card (with option to personalize)
  • $25 minimum deposit to open
  • Free BBVA ATM withdrawals

Fees to watch out for:

  • $3 fee for out-of-network ATM withdrawals
  • $38 insufficient funds fee ($32 in California)
  • $15 deposit item returned fee
  • $32 stop payment fee made over the phone or in person ($30 in California); $25 if made online
  • No fee for closing your account within 180 days of opening

LEARN MORE Secured

on BBVA’s secure website

Member FDIC

6. Woodforest National Bank Second Chance Checking

Woodforest National Bank

This regional bank has a checking account aptly named Second Chance Checking, to help people rejected by other banks access — provided they live in one of the 17 states where a physical branch exists and can meet the $25 minimum opening deposit requirement. Those states are: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia.

Fees to watch out for:

  • $9.95 monthly maintenance fee if you use a direct deposit (or $11.95 without a direct deposit), $3.00 monthly paper statement fee (which can be avoided if you sign up for electronic statements)
  • $9 one-time account set-up fee
  • $2.50 ATM withdrawal fee when used at a non-Woodforest network ATM
  • $15 debit card set-up fee
  • $29 overdraft fee (for each charge)

LEARN MORE Secured

on Woodforest National Bank’s secure website

Member FDIC

7. First National Bank and Trust Company Renew Checking

First National Bank and Trust Company (WI)

First National Bank and Trust Company’s second chance bank account offering is called Renew Checking. You’re eligible for a new account if you live near the bank’s Beloit, Wisc. headquarters, in southern Wisconsin and northern Illinois.

Account Features:

  • No monthly minimum balance
  • $25 minimum deposit to open
  • Free online and mobile banking, bill pay, and e-statements
  • Access to 70,000 no-fee ATMs worldwide through Allpoint and MoneyPass
  • Eligible to upgrade account after twelve months in good standing

Fees to watch out for:

  • $9.95 monthly service fee, or $7.95 with direct deposit
  • $30 early account closure fee (if closed within 90 days of opening)
  • $34.50 overdraft fee
  • $34.50 insufficient funds fee
  • $34.50 stop payment fee

The fee schedule for personal accounts at First National Bank and Trust Company is here.

LEARN MORE Secured

on First National Bank And Trust Company (WI)’s secure website

Member FDIC

Alternatives to a second chance bank account

Get a prepaid debit card

Tired of the traditional banking experience? You could opt for a prepaid debit card instead. With a prepaid card, you can load money onto it and spend at merchants that accept major credit and debit cards. But if you try and spend more money than what’s on the card, the transaction is declined — although this prevents you from accruing any overdraft or insufficient funds fees. This is useful if you feel you may still have trouble managing your spending and need an extra layer of security to prevent you from getting into trouble.

Some prepaid cards offer extra perks like advance direct deposit and free ATMs so long as you stay in their network.

Open a secured credit card

You may also have better luck applying for a secured credit card if your credit score is in good enough shape. Usually, this requires depositing cash with the lender, who then gives you the credit card for the same amount. Each month that you make on-time payments, the bank will report that good behavior to the credit bureaus, helping you boost your credit score. At the end of the payment period (generally 12 months, though it varies by banks), you’ll get the full deposit back.

Secured cards can come with high interest rates and many don’t feature the enticing rewards other high-end cards do, but they get the basic job done for consumers who don’t need a card with a high credit limit.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

Advertiser Disclosure

Best of, Earning Interest, Eliminating Fees

The Best Online Checking Accounts in 2019

banking apps

Opening an interest-bearing checking account is an easy way to boost your savings without completely rearranging your budget. Nowadays, your checking account doesn’t have to be the basic, low-yield account you might be accustomed to. A checking account can earn interest at pretty competitive rates, especially if you’re willing to ditch the traditional big bank in lieu of digital-only competitors. Brick-and-mortar rates often pale in comparison to online rates.

You’ll typically find checking account rates around 0.01% APY if you head to your local big bank branch. Let’s say you have $10,000 to deposit into your new checking account. Choosing an account with that low 0.01% APY will earn you $1 at the end of a year. On the other hand, opening a high-yield checking account at a 2.00% APY, for example, will earn just over $200 in a year.

Your best bet is to open an online checking account, as those tend to have the highest rates. You’ll also find hardly any monthly service fees and little to no fees for ATM usage. Plus, with some of the best mobile apps, online banks making banking on-the-go easier than ever.

There are several great options out there, which give you a great opportunity to find an account that’s just right for you. But we understand that it can also be overwhelming to search through all your options and commit to switching banks. We’ve made it a little easier for you by searching through 12,000 banks and credit unions.

To find the best online checking accounts, we looked for accounts that offer:

  • Competitive interest rates
  • No monthly account fee
  • No ATM fees and reimbursement of other bank ATM fees
  • Interest income on the deposited funds
  • Strong mobile banking app and user interface

It’s important to figure out which aspects of a checking account are the most crucial for your own banking success, whether that’s easy ATM access or earning at the highest rate. There isn’t always going to be one account that’s the “best” across every dimension: for example, the account with the highest interest rate may not have unlimited ATM fee reimbursements. You might have to make a trade-off when choosing an account.

Here are our favorite checking accounts available in September 2019:

The Best Checking Accounts in September 2019

Institution

APY

Minimum Balance Amount

Simple

2.02%

$0.01

Aspiration

2.00%

None

Discover Bank

None, but offers 1% cash back on up to $3,000 each month

None

Ally Bank

0.60%

None

Bank of Blue Valley

2.00%

Up to $50,000

Empower

1.90%

None

MemoryBank

1.40%

$50

Axos Bank

Up to 1.25%

None

TIAA Bank

1.21%

$5,000

nbkc bank

1.01%

$0

Consumers Credit Union

Up to 5.09%

$10,000 - $20,000

Charles Schwab

0.31%

None

1. High APY – Simple – Protected Goals Account – 2.02% APY (no minimum) + Up to $300 Bonus Offer with qualifying activities

Checking Account + Protected Goals Account*Simple was created out of frustration over the banking industry. The founders were confounded by the complexities of certain bank accounts. So instead of just letting the problem be, they came up with a solution – an account that earns interest and helps you budget your money “in one simple app”. What makes this banking platform stand apart from other online accounts? Well, for starters, it’s a Checking Account + Protected Goals Account that hardly has any fees, not even if you use an international ATM (however, a fee may be charged by the ATM owner). Another standout feature is that you have the opportunity to earn 2.02% APY in the Protected Goals Account. To earn the APY, you’ll have to have a minimum of $0.01 in the Protected Goals Account. This account is meant to be used to help you save money towards a goal. It’s like a savings account without transfer limitations. You can make as many transfers between this account and the checking account as you’d like without running into excess transfer fees.

Plus, right now, Simple is offering a bonus of up to $300 with qualifying activities. If you open an Individual Protected Goals Account, you can earn $150. If you open a Shared Protected Goals Account, you can also earn $150. If you choose to open both, you can earn a total of $300. You’ll need to open each account(s) by 9/30/19 4:59PM PT. You’ll need to deposit a minimum of $10,000 in each account by 10/15/19 4:59PM PT. If you can maintain that balance through 12/31/19 4:59PM PT, you’ll earn the bonus(es), which will be credited to you by 1/14/20 4:59PM PT. In addition to this competitive offer, there are a ton of other features that make Simple worth considering!

LEARN MORE Secured

on Simple’s secure website

2. No ATM fees: Aspiration – The Aspiration Account – Unlimited ATM fee reimbursement + 2.00% APY

Aspiration AccountAspiration is a unique company that is trying to change the face of banking services. This account is a great way to avoid fees. There is no monthly fee and no minimum deposit. Even better, there are no ATM fees and unlimited reimbursement of ATM fees charged by others. You can use your ATM card anywhere in the world and never pay a dime. You decide how much you want to pay for the account – and that can be $0. Aspiration is making the bet that you will appreciate the value and decide to pay them something. But you are not obligated to make any payment.You can also earn interest on this account. You’ll earn up to 2.00% APY on your entire balance. And the best part: you don’t have to “do things” (like use your debit card) to get the rate. So long as you have the account, you get the interest rate.

Aspiration has recently launched a mobile banking app, making it even easier to get everything you need done. You can read our full review of Aspiration here. If you want an easy way to use any ATM, free BillPay and earn a good (by checking account standards) interest rate, the Aspiration Account is a great choice.

LEARN MORE Secured

on Aspiration’s secure website

3. Discover Bank – No fees + 1% Cash Back on up to $3,000 in debit card purchases per month

Discover Cashback DebitDiscover’s Cashback Debit is a unique checking account because it offers 1% cash back each time you swipe your debit card to purchase something up to $3,000 each month. This means that you can earn up to $360 back in cash each year. Keep in mind that there are certain exceptions (like ATM transactions) to receiving the 1% cash back. Other perks of this account include no monthly fees, and access to over 60,000 ATMs for free. Discover used to have a First Fee Forgiveness policy where they would waive the first eligible fee charged to the checking account during each calendar year. However, Discover recently decided to not charge any fees at all. This is a huge perk for accountholders. Discover doesn’t require a minimum amount to open or a minimum daily balance to earn the cash back.

LEARN MORE Secured

on Discover Bank’s secure website

Member FDIC

4. Ally – Interest Checking Account: $10 of ATM fees reimbursed monthly, and up to 0.60% APY

Ally Bank
Ally is a great all-around online bank with no monthly fees and no minimum balance or direct deposit requirement. Ally charges no ATM fees, and it reimburses up to $10 each month. You can link your savings account (which is one of the best in the country, paying 1.90% APY), and it will provide free overdraft protection.

The checking account pays 0.10% APY on balances less than $15,000, and 0.60% APY on balances of over $15,000.

Banking with Ally also gives you 24/7 access to customer service, which is just a phone call or chat session away. They also use 21st century technology like remote deposit through their mobile banking app and Zelle®, which allows you to securely send and receive money from friends and family.

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

5. High Rate: Bank of Blue Valley – 2.00% APY on balances up to $50,000, $500 minimum to open

Platinum CheckingBank of Blue Valley is a Kansas-based bank with over $564 million in assets. It’s extremely rare to see banks offering high rates on checking accounts without requirements to earn the high rate. However, this bank is offering a 2.00% APY on balances up to $50,000. You’ll need a minimum of $500 to open the account. While Bank of Blue Valley doesn’t make you jump through hoops to earn the high rate, you will need to maintain an average daily balance of $7,500 to avoid the $12 monthly maintenance fee. This account does come with free checks and if you’re able have at least one direct deposit post to this account, you’ll be rewarded with ATM fee refunds up to $20 per month (the out-of-network ATM fee is $2.50). Bank of Blue Valley has a mobile banking app that includes mobile remote deposit, bill pay, the ability to pay a person, and more.

LEARN MORE Secured

on Bank Of Blue Valley’s secure website

Member FDIC

6. High Rate: Empower – 1.90% APY, no minimum to open or balance to earn APY

Checking AccountEmpower originally launched as a personal finance app and evolved into a mobile banking app powered by Evolve Bank & Trust. The Empower Checking Account currently offers a 1.90% APY. It doesn’t require a minimum deposit to open nor does it ask for a minimum balance to earn the APY. This account also doesn’t have any fees and you’ll get one out-of-network ATM fee reimbursed per month. However, Empower claims access to over 25,000 free ATMs nationwide. Other perks with this account include a cashback debit card that comes with zero liability protection. One downside that we can find is that there doesn’t seem to be check-writing capabilities with this account. However, if you’re more interested in keeping your banking in the palm of your hand, Empower’s mobile banking app not only helps you save your money, it also helps you budget and sync all your financial accounts to the app to give you an overall snapshot of your finances.

LEARN MORE Secured

on Empower’s secure website

Member FDIC

7. MemoryBank – 1.40% APY (for the first year) on balances up to $250,000

MemoryBank
If you are looking for a high interest rate on a big balance, it is hard to beat MemoryBank. You can earn 1.40% APY on balances up to $250,000 for the first year so long as you do the following three things. (1) You must receive at least one electronic deposit every month. If you have your payroll deposited into the account, that works. (2) You will need to use your debit card for at least 5 in-person or online purchases. And (3) you need to get your statements online (no paper statements). If you have a large balance and want to find the best liquid account, MemoryBank has a good offer. You need at least $50 to open the account. You will get access to AllPoint ATMs.

LEARN MORE Secured

on MemoryBank’s secure website

Member FDIC

8. No domestic ATM fees & high APY – Axos Bank – Rewards Checking – up to 1.25% APY

Rewards Checking - 3 QualificationsAxos Bank offers a nice combination of a good interest rate and ATM fee reimbursement. You can receive up to 1.25% APY based upon your activity in the account. There are three requirements, and each requirement gives you 0.4166%. If you receive a monthly direct deposit totaling $1,000 or more, you can earn 0.4166%. If you use your debit card at least 10 times per month, you can get another 0.4166%. And if you use your debit card 15 times a month, you get another 0.4166%. So – if you get your direct deposit and use your card 15 times a month – you will get the 1.25% APY. You can also get unlimited domestic ATM reimbursement. If you are a heavy debit card user and do not travel overseas very often, Axos Bank can be a better option than Aspiration.

LEARN MORE Secured

on Axos Bank’s secure website

Member FDIC

9. TIAA Bank – High Yield Checking: 1.21% APY (for the first year) with $5,000 minimum to open

TIAA Bank
TIAA Bank is currently offering a one-year introductory APY of 1.21% on their checking account. They don’t charge a monthly fee or ATM fees (as long as the ATM is within network). Aside from depositing a minimum of $5,000 into the account, TIAA Bank does not impose requirements to earn the APY. While they do have an online banking platform, their mobile app seems to be lacking. If banking on-the-go is important to you, you may want to consider another institution. However, they do have a great rate for a checking account with little-to-no fees.

LEARN MORE Secured

on TIAA Bank’s secure website

Member FDIC

10. No fees: nbkc bank – No monthly fees + 1.01% APY

Personal Accountnbkc bank, formally known as National Bank of Kansas City, is a small institution in the Midwest that caters customers nationwide through their online and mobile banking platforms. They are a privately owned company with more than $630 million in assets.nbkc is all about making banking simple and they’ve done just that with their checking account that virtually has no fees. All it takes is $5 to open the account and you can start earning 1.01% APY on all funds held in the account.There are no monthly fees, no overdraft or non-sufficient funds fees, no fees to stop payments, no fees to get a box of checks, no fees for incoming domestic wires, no minimum balance to earn the APY once the account is opened, and no ATM fees as long as the ATM is part of the Moneypass® network. Even if the ATM is not part of the Moneypass® network, nbkc will reimburse up to $12 in ATM fees per month. And just to prove how transparent they are, they openly disclose that the only two fees that may apply are $5 to send a domestic wire and $45 to send or receive international wires.

Banking can be done online or through their mobile banking app, which allows you to deposit checks at no charge. If you want a checking account that charges hardly any fees and allows you earn a little interest, this account is a great option.

LEARN MORE Secured

on nbkc bank’s secure website

Member FDIC

11. Consumers Credit Union – Free Checking: Unlimited ATM fee reimbursement + up to 5.09% APY possible

Consumers Credit Union (IL)
Anyone can join Consumers Credit Union, which has been around since 1930 and is based in Lake County, IL. In order to join, you only need to pay a one-time, non-refundable $5 fee to their sponsor, the Consumers Cooperative Association. Once you are a member, you are eligible for all products, including the Free Checking Account.

This account can offer incredible value, but you need to meet certain conditions. In order to get unlimited ATM fee reimbursement, you need to:

  • Make at least 12 debit card purchases per month. The purchases cannot use the 4-digit pin code – it has to be treated as a credit transaction (so that the credit union earns the maximum interchange possible)
  • Each month there must be at least one direct deposit OR one ACH debit OR one online bill payment.
  • Login to online banking at least once per month, and
  • Receive eDocuments / eStatements (no paper statements).

If you meet those requirement, you will earn a 3.09% APY on balances up to $10,000. You have the opportunity to earn an even higher rate of return if you open a Visa credit card from the credit union. If you spend at least $500 a month on the credit card, your interest rate increases to 4.09% APY on balances up to $15,000. If you spend at least $1,000 a month, you can earn 5.09% APY on balance up to $20,000.

This is a valuable proposition – but it is complicated. We have included it because 5.09% APY and unlimited ATM fee reimbursement is an amazing deal. However, if you don’t meet the requirements you will not get ATM reimbursement and will only earn 0.10%.

LEARN MORE Secured

on Consumers Credit Union (IL)’s secure website

NCUA Insured

12. Charles Schwab – High Yield Checking: Unlimited ATM fee reimbursement + 0.31% APY

Charles Schwab Bank
If you want to be able to use your ATM card anywhere in the world – for free – this account is a good option. With Charles Schwab’s High Yield Investor Checking Account, you will not be charged a fee for using an ATM. If you use an ATM overseas, there will be no foreign transaction fee. And – best of all – if the ATM charges a fee of its own, Schwab provides unlimited ATM fee reimbursement.

This account pays 0.31% APY, and there are no minimums or monthly service fees.

There are no fees to cover overdrafts when funds are available from a linked Schwab brokerage or savings account.

LEARN MORE Secured

on Charles Schwab Bank’s secure website

Member FDIC

Runner Up: Fidelity Cash Management Account: Unlimited domestic ATM fee reimbursement

Fidelity
Fidelity’s Cash Management Account is great for those that have larger balances, as there is a $1,250,000 insurance limit, but there is no minimum balance required.

Similar to Charles Schwab, there are no ATM fees to worry about – they’ll reimburse you the same day if you’re charged. There are also no monthly or overdraft fees to worry about. There is one big difference to Schwab: if you get charged for using your ATM outside of the country, that fee will not be reimbursed.

Fidelity currently offers 0.13% APY, but it is a brokerage account rather than a “regular” checking account. They offer cash management tools so you can set up custom alerts when you reach a certain balance that will remind you it’s time to invest.

Unfortunately, there’s no option to open a line of credit – you have to link a savings or brokerage account to your Fidelity account in case you overdraft and want items to clear.

LEARN MORE Secured

on Fidelity’s secure website

Member FDIC


Checking account best practices

Consider hybrid savings/checking accounts

In today’s competitive savings rate atmosphere, some banks are offering the best of both a checking and savings account in the same product, like the Simple Checking Account + Protected Goals Account, our top pick above. These hybrid accounts offer the flexibility of a checking account by including a debit card and avoiding the six-transaction limit of savings accounts. Some accounts might also offer the ability to write checks through the account (however, Simple does not).

Even better, these hybrid accounts also offer the high-yield competitive rates of a savings account (think above 2%!). Opening this kind of account can prove to be a great addition to your savings profile, especially since most checking accounts tend to offer unremarkable rates. Simple goes even further by helping you save towards a specific Savings Goal instead of just earning a high interest rate — although saving at least $2,000 towards that goal enables that high rate.

Of course, money market accounts are already known as hybrid-like accounts with high interest rates. But without limiting your transfers and transactions to six per cycle, these new checking/savings hybrid accounts (or cash management accounts, as they might be called) are able to set themselves apart from money market accounts. Money market accounts also tend to require much higher balance limits and charge monthly service fees, unlike these new accounts we’re starting to see.

Pair your checking account with a high-yield savings account

So if not in a checking account, where should you keep the rest of your money? Like we say above, you have a number of options including savings accounts, money market accounts and CDs. Online savings accounts generally earn at much higher interest rates than checking accounts, so they’ll grow your money more efficiently.

In turn, money market accounts can earn even higher rates, although they usually require high deposits and balances. Both MMAs and savings accounts limit you to six transfers or withdrawals per month so you can leave your savings alone to grow. Money market accounts are like a mix between checking and savings accounts, as many of them include check-writing abilities and/or a debit/ATM card for more convenient access than a typical savings account.

For a longer-term savings commitment, you can turn to certificates of deposit or CDs. They earn at high interest rates and lock in your opening rate for the duration of an account’s term. You can’t withdraw your growing funds until the term ends.

Find an account with little to no fees

Another way to make better use of your checking account is to avoid the fees that are often associated with brick-and-mortar bank accounts. According to a MagnifyMoney analysis of FDIC data, in 2017 Americans paid over $36 billion in fees to banks (see graph below), some of which include overdraft fees, ATM fees and monthly maintenance fees. This number is down since 2009’s $41 billion in total fees, but has seen a steady increase since 2013.

 

Among the fees, overdraft fees are the biggest single burden on Americans, representing over one third of fees paid over the last five years. Account maintenance fees come in second, at over 10%, while ATM fees represent over 5%.

 

Moving your banking online can help you avoid monthly service fees. The same is also true for ATM fees. Even without physical locations, online banks can still provide access to tens of thousands of ATMs through various ATM networks. Plus, many online banks will refund any ATM surcharges you do face, sometimes up to a certain dollar amount.

Resist the urge to hoard cash in a checking account

It can be easy to just dump all your income into your checking account and leave it there. After all, that’s the account you use to pay for expenses. But even if your checking account earns interest, you can do better by your money.

There are two main reasons your money would be better off not sitting in checking:

#1 You could miss out on higher interest rates
Interest rates on checking accounts are generally pretty pitiful. Even when they seem high (perhaps 0.60% or even 1.00%), there can be a lot of hoops to jump through in order to secure that interest rate. Instead, consider putting your money into one of the nation’s best savings accounts, best money market accounts or CDs. Your money can easily earn 1.00% or more with those accounts.

#2 You don’t want to give fraudsters access to your life savings
Fraud is another reason you may want to keep a minimal amount in checking. Bank fraud is so prevalent you’ll likely get smacked by it at some point. For credit card users, it isn’t as worrisome because the money charged to a credit card isn’t coming directly out of your bank account and credit issuers commonly offer zero fraud liability protection. On the other hand, debit card fraud means a crook gains direct access to your account and can be draining your actual funds in real time. By not keeping a ton of money in checking, you can reduce the damage a thief can do.

If your card is stolen and you report it to your bank within two days, you can be responsible for up to $50 of unauthorized charges. Waiting longer than two days can make you responsible for up to $500 in unauthorized charges. Additionally, if you notice any unauthorized charges on your account statement, you have 60 days to tell your bank to avoid liability for following transfers. Even if your bank reimburses you for the funds, it’s still a hassle to spend days — even weeks — without having access to that money.

The bottom line: It’s probably time to move your banking online

In all, the best way to make the most of your checking account is to ditch your brick-and-mortar bank in favor of fewer fees, less hassle, more convenience and higher interest rates. All of these banks listed above offer mobile apps with several convenient features, including the ability to deposit checks by taking a photo, so you don’t have to worry about running out to a local branch. These apps also make it easier to transfer money between your accounts, pay bills online or send money to family and friends in a pinch.

If you want your money to do more for you with less maintenance, online checking is the way to go.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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College Students and Recent Grads

How to Set Up IBR, PAYE and ICR Student Loan Repayment Plans

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

Does the amount you earn on a yearly basis pale in comparison to your monthly student loan payments? Do you have federal student loans? If the answer is “yes” to both of these, then you might benefit from a student loan repayment plan. These income-driven plans include:

Income-driven repayment plans can reduce your monthly payment amount — sometimes dramatically — because they cap that payment at a (hopefully) affordable level, based on your income and family size. Your payment adjusts annually according to these factors.

Specifically, the amount you pay is calculated as a percentage of your discretionary income. According to the Federal Student Aid office, for IBR and PAYE, discretionary income is the difference between your income and 150% of the poverty guideline for your family size and state of residence. For ICR, it’s the difference between your income and 100% of the poverty guideline. (You can look up the poverty guidelines used to determine eligibility for some federal programs, if you want more information.)

A great benefit of these plans is that each has a maximum length — usually 20 or 25 years — after which all remaining loan balances are forgiven. Note, however, that you will generally be taxed on the amount that gets wiped away.

Want to find out how to apply for an income-driven repayment plan? Read on for information on how the process works.

Getting started with income-driven repayment plans

Generally, if you want to set up your student loan account on an income-driven repayment plan, your best bet is to first contact your student loan servicer. (Not sure which loan servicer you have? You can check on the National Student Loan Data System website.)

If you log into your account online, you should see a section for changing your repayment plan. At the least, your servicer should address the issue in an FAQ section of its site.

It’s your loan servicer’s job to help you find the best plan for your situation, but you need to contact it as soon as you start having difficulty in making payments. You don’t want to miss any payments and end up delinquent (or worse, in default) because you couldn’t pay. Plus, loans that are in default aren’t eligible for income-driven repayment plans.

How to apply for income-driven student loan repayment

The application process is very simple and straightforward. The first step is to fill out the Income-Driven Repayment Plan Request form. This can be done online, or you can apply with a paper application supplied by your student loan servicer.

When you make your request, you have to choose the specific plan you’d like to go with. You can select one yourself, or you can ask your loan servicer to choose the plan with the lowest monthly payment amount.

Since you’re applying for a repayment plan based on your taxable income, you will need to provide proof of income. The easiest way is to use your most recent tax return, as long as your income hasn’t changed significantly from the date you filed. You will also need to have filed a federal income tax return for the past two years.

The online application makes it easy to find your adjusted gross income (AGI) — you can use the IRS Data Retrieval Tool to import your income information. If you apply with a paper application, you’ll need to supply a paper copy of your most recent federal tax return or an IRS tax return transcript.

If your income has changed a lot since you last filed, or if you haven’t filed two federal tax returns yet, there are other ways of proving your income.

First, if you don’t have any source of income at all, you just need to indicate that on your application. Only taxable income counts. So if you receive any government assistance or any other income that’s not considered taxable, you don’t need to report it here.

If you do earn an income, you’ll need to provide your most recent pay stubs or other alternative documentation that shows how much you make.

Additionally, if you have federal loans with multiple loan servicers, you must request income-driven repayment for each loan individually. There’s a section of the application that asks if you have eligible loans with more than one servicer, so you can indicate that there.

The application itself shouldn’t take long to complete, but the entire process can take a few weeks, depending on which loan servicer you have.

If you have an immediate need to lessen your payments, your loan servicer may apply a forbearance to your federal loans while the process wraps up. That’s why it’s important to contact your servicer as soon as you realize that you can’t make your payments.

You have to reapply annually

You’ll be required to submit your proof of income on an annual basis after you apply the first time. As your income changes, so does your payment, so you need to provide this information continuously. However, there’s no income limit for income-driven repayment plans.

If you start earning more and you’re on an IBR or PAYE plan, your payment amount is capped at the amount you’d be paying under the standard 10-year repayment plan. It will never exceed that amount. Technically, your loans will still be under your chosen income-driven repayment plan, but your monthly payment is no longer based on your income. You can still have your outstanding loan balance forgiven after your repayment term ends (if you don’t pay your loan off before then).

For ICR plans, your payment amount could fluctuate between the lesser of 20% of your discretionary income and what your monthly payment would be if you had a 12-year fixed plan. On a REPAYE plan, your monthly payment is simply 10% of your discretionary income.

Whose income is taken Into consideration?

If you’re married and wondering if your spouse’s income will be taken into consideration, it depends on how you file your federal taxes.

Filing separately means only your income and loans will matter (unless you’re on a REPAYE plan, which considers both incomes, regardless of how you file).

Filing jointly means your monthly payment will be based off of your joint income. If you and your spouse file jointly and you both have eligible federal student loans, all of them will be taken into consideration, but your spouse doesn’t have to enter into an income-driven repayment plan for you to join.

Meet the income-driven repayment plans

Now, let’s take a look at each major plan type and some of their respective details:

Income-Based Repayment plan overview

You don’t qualify for IBR unless your payment amount would be less than what you’re paying under the standard 10-year repayment plan.

A good way to estimate whether you’ll qualify is to check if your total student loan debt is higher than (or makes up a significant portion of) your annual discretionary income, which would reduce your monthly payment under IBR. If your debt-to-income ratio — how much student loans and other debt you have relative to your income — is high, you may qualify for this option. You can calculate your DTI in a few simple steps using information about your monthly income, debts and payments.

Borrowers who got their first student loans after July 1, 2014, have a maximum term of 20 years under IBR plans, while borrowers who had loan balances before July 1, 2014, have a maximum 25 year term. Anything left after those terms expire will be forgiven.

Pay As You Earn plan overview

For PAYE, your monthly payment will be about 10% of your discretionary income, and never more than what you’re paying under the standard 10-year payment plan.

You have a maximum of 20 years to pay back your loans under this plan, after which your balance is forgiven.

The qualifications for PAYE are the same as IBR — you must be paying less under PAYE than you were under the standard 10-year plan.

However, PAYE is only available to those who were new, first-time borrowers as of Oct. 1, 2007, and who received a disbursement in the form of a direct loan on or after Oct. 1, 2011.

Revised Pay As You Earn plan overview

REPAYE is a fairly recent addition to the income-driven repayment plan menu. It’s similar to PAYE in many ways but distinct in a few key ones.

For example, unlike with PAYE, REPAYE is available to any borrower, regardless of when you received your first federal student loan. And, if you’re married, your spouse’s income will be considered in calculating your monthly payment, no matter how you file your taxes.

Under this plan, your monthly payment is 10% of your discretionary income, and you must repay your loans for 20 years if they were used for undergraduate studies (or 25 years if you took out loans for graduate or professional studies) before they are forgiven.

Income-Contingent Repayment plan overview

Your monthly payment under the ICR plan is the lesser of these two options: 20% of your discretionary income, or the amount you would pay on a 12-year fixed repayment plan, adjusted according to your income.

Under this plan, your term is 25 years before you can receive forgiveness. There are no initial guidelines you must qualify under — anyone can choose this plan to repay their student loans.

Benefits of income-driven repayment plans

As mentioned, the big bonus for all four of these repayment plans is that your outstanding balance is forgiven after your repayment term is complete. Also, if you qualify for forgiveness after 10 years through the Public Service Loan Forgiveness program, that takes precedence.

IBR, PAYE and REPAYE have an extra perk if you took out a subsidized student loan: If your monthly payment isn’t enough to cover any interest that accrues monthly on your subsidized loan, the government will pay the difference for the first three years. For REPAYE plans, the government will also pay half of the difference on your unsubsidized loan and continue to cover half of the difference after three years on your subsidized loan.

You can use MagnifyMoney’s student loan calculators to see which plans could offer you the lowest monthly payment. Income-driven plans aren’t guaranteed to give you the lowest possible payment — all situations are different. And don’t forget that there are other repayment plans that aren’t reliant upon your income but can still lower your monthly payment, such as the graduated and extended repayment plans.

Check with your loan servicer first

Before applying for an income-driven repayment plan, it’s best to check with your loan servicer to get its input. You don’t want to end up owing more per month than you do now. These repayment plans are designed to help you, not hurt you.

You may find that forbearance or deferment is a better option, especially if you’re only experiencing a temporary economic hardship. Note that both forbearance and deferment can result in interest piling up, so be careful to examine all your options before you decide.

And while it’s crucial to check with your servicer, remember that this is your decision, and you don’t have to follow your servicer’s advice. The best solution will be the one that saves you the most money while also fitting with your own financial goals.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

Emily Long
Emily Long |

Emily Long is a writer at MagnifyMoney. You can email Emily here

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