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.
Oppositions 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.