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Check Cashing Centers: Pros, Cons & Alternatives
Most people have mixed emotions about using check cashing centers; however, there is good discussion as to why these financial service centers should, or should not, be used.
Approximately 28% of Americans don’t use traditional banking to handle personal finances. The majority of these people use check cashing centers for handling their financial needs. However, there is debate concerning whether these financial service centers provide a useful alternative to traditional banking, or exploit those who use them.
Check Cashing Center Pros
For some, the use of check cashing centers is almost necessary because they are unable to open checking accounts at banks, usually because of blemishes on their banking history. For others, check cashing centers are used because of the convenience they provide, like business hours that begin earlier and extend later than banks. While flexible hours may play a role in their use, others enjoy the variety of services offered in one place, such as:
- Payday loans and other types of loans
- Money transfers
- Bill payments
- Money orders
- P.O. boxes
- Stamps, envelopes, and mailing services
- Notary public
- Currency exchange
- Prepaid debit and credit cards
- Public transportation passes and tokens
- EBT services
- Photocopying and faxing services
- ATM machines
- Motor vehicle renewal and registration
Some consumers with checking accounts use the services of check cashing centers, in addition to banks, because of the immediacy of funds. When a check is cashed into a checking account, the whole amount usually cannot be immediately accessed; there may be a waiting period for the check to clear. With check cashing centers, consumers are immediately paid the full amount of their checks minus a service fee. However, with the Check 21 law (put into effect on October 28, 2004) banks are enabled to handle more checks electronically, making check processing faster.
Check Cashing Center Cons
Although some may consider check cashing centers as providing a convenience to its consumers, it may come at a hefty price.
Critics of check cashing centers claim they exploit the consumers they serve, while providing a facade of convenience. The most common argument against the use of check cashing centers is the fees associated with them. Checks cashed at these centers can incur an average of 3-5% of the check amount in fees, regardless of the nature of the check. On average, the annual costs of using a financial service center for check cashing is greater than fees associated with using a checking account for similar needs.
With the online nature of most banks, and popularity of electronic payment, the convenience of check cashing centers gets lost when considering the ease of depositing paychecks electronically and paying bills online. Even for those individuals who are unable to open a checking account, there are alternatives, such as second chance bank accounts, which provide users the convenience of a checking account without having to pass a credit check or ChexSystems verification.
Aside from the convenience check cashing centers may present, there is an inherent danger associated with them. Since the majority of people use check cashing centers for cashing payroll and other types of checks, they are usually left having to leave the facility with a significant amount of cash in hand.
This can be potentially dangerous when considering the proximity around most check cashing locations. Most check cashing centers are located in more urban neighborhoods, where crime may be more prominent.
Deciding on whether to use a check cashing center comes down to personal choice. There are good reasons for and against using such a service. Accessibility, convenience, cost, potential danger and preference all come into play when deciding which service works best for you.
Check Cashing Alternatives
Are you tired of paying the high price of cashing a check at a check cashing center? Below are some alternative methods for cashing checks.
Checking Account
The more common way to cash a check is to cash it at a bank if you have an existing checking account. Banks will cash checks for account holders, just as long as there are enough funds to cover the check in case it bounces. If funds in the account are not enough to cover the amount on the check, the account holder must wait until the check clears to access the funds, usually only a day or two.
Second Chance Banking
Second chance banks are available to people unable to open a traditional checking account. They are similar to checking accounts, but with some restrictions. There may be fees associated with using second chance banking such as activation and deposit fees; however, some companies allow consumers to cash personal and non-personal checks at available branches.
Prepaid Cards
Most prepaid card companies allow card holders to have payroll and government issued checks (such as social security, disability, unemployment, and tax refunds) directly deposited into their account for free. Once a payroll check is deposited, the card holder can withdraw or make purchases against the deposited funds.
Issuing Banks
Some banks will cash checks for non-customers if the check they are cashing is drawn on an account from that bank. This method can be used to cash both personal and payroll checks. The name of the bank that a check is drawn on can usually be located on the bottom right corner of the check. Some banks charge a fee when cashing checks for non-customers while others do not.
Walmart
Most Walmarts across the nation allow customers to cash payroll checks and some government issued checks. Walmart will cash checks that are equal or less than $1500. The cost for cashing a check is usually a maximum charge of $3. To cash a check, the customer has to show a valid ID and enter their social security number using a PIN pad.
Safeway
Safeway will cash non-personal checks that are equal or less than $1,499, including payroll, social security, unemployment, tax refund, and disability checks. The cost is $2.25 for every $200 cashed and they will only cash a check within 7 days of being issued. When cashing a check, the customer will need to show valid ID and enter their social security number using a PIN pad.
Local Grocery and Liquor Stores
Like Safeway, some local grocery and liquor stores offer check cashing to their customers. For example, most Lucky grocery stores will cash non-personal checks other than tax rebates. Procedures and restrictions at Lucky grocery are similar to those of Safeway, but usually with a fee of $1.00 for every $100 cashed.