For around 6 percent of adults in the U. This small portion of the population is often known as the unbanked, which means they do not have a traditional checking or savings account. Instead, they have to explore other ways to cash their checks and turn written amounts into real dollars.
They often have signs that advertise their check-cashing ability, along with payday loans, wire transfers, money orders and other financial transactions.
According to the trade association that represents many of these places, Financial Service Centers of America FISCA , there are more than 13, locations across the country.
A lot of people put a lot of money through them, too. Check-cashing services offer instant access to cash. While depositing checks in a traditional bank account often includes a processing time where the funds may be available the following business day or a few days later, you can take your check into one of these service centers, show them your government ID and walk out with the money a few minutes later.
The convenience of speed comes with a cost, though. Check-cashing services charge a fee for each transaction. That fee will vary depending on where you cash your check and what type of check you hand over.
Consider some of these check-cashing costs. Some of the biggest names in the business — ACE Cash Express and United Check Cashing, for example — do not readily list the fees for their services online. To eliminate confusion, you could skip visiting a standard check-cashing outlet and take your check somewhere you may already be visiting for other needs. Michael Sullivan, a personal finance consultant at Take Charge America, says that the biggest downside to check-cashing services is the cost.
Sullivan also points out that you might walk into a location with the simple goal of cashing your check, but you can be lured in to signing up for more services.
Despite those drawbacks, the reality is that plenty of people have to use them because they cannot open a bank account. But Americans paid more than that on overdraft fees in a record thirty-eight billion dollars.
Banks are allowed to charge checking-account customers, on average, a hundred and forty dollars per day in overdraft fees. At RiteCheck and most other check cashers, in contrast, the fees for each transaction are typically displayed on large illuminated signs that span the row of teller windows, like the menu sign at a fast-food restaurant.
Checks that are late. Some of this is an attempt by banks to make up the revenue they lost as a result of legislation that clamped down on what they could charge for overdraft fees and debit-card swipe fees—fees that banks charge retail stores for each debit-card transaction. Banks expect to take in eighty-five dollars to a hundred and fifteen dollars in annual fees from each account, and this is particularly difficult to do when serving low- and moderate-income people.
Meanwhile, free checking accounts are becoming harder to find. Only thirty-nine per cent of non-interest-bearing checking accounts were free in , down from seventy-six per cent in The average monthly service fee on checking accounts increased twenty-five per cent from to Researchers and the media tend to use words like sleazy, predatory, and abusive to describe check cashers and payday lenders.
Yet banks are seldom described in similar terms. They should be. By Rachel Morgan Cautero. Rachel Morgan Cautero has over a decade of experience as a writer and editor, specializing in personal finance and lifestyle matters.
She writes about banking, saving money and budgeting, and family finances. She has a master's in journalism from NYU. Learn about our editorial policies. Reviewed by Somer G. Article Reviewed May 20, Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas.
Learn about our Financial Review Board. Pros Provides financial services to the unbanked and underbanked Makes money available almost immediately. Cons May charge extremely high fees Easy to get stuck in a cycle Can leave consumers stuck using non-traditional financial services. Key Takeaways A check-cashing service provides a way to convert checks to cash if you're unable to open a checking account because of past financial problems or can't reach your bank and need cash fast.
It makes funds available almost immediately but comes with high fees that can erode your earnings. It should only be a stop-gap measure until you find yourself on better financial footing and can get a bank account.
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