Estimates show that 4.5% of US households were unbanked in 2021—meaning that nearly 6 million Americans do not have bank accounts. If you’re among them, you need alternative solutions, like check cashing stores, to simplify your finances.
This guide outlines the check cashing store definition, plus how such a location works and differs from a traditional bank. Explore check cashing services to help determine if they offer the right financial solutions for your monetary needs.
What Are Check Cashing Stores?
A check cashing store or center is a financial provider that allows consumers to cash in their checks in exchange for fees. However, this doesn’t mean that the store is a bank. The benefit of using check cashing stores is gaining immediate access to your funds rather than having to wait for the check to clear a bank account.
With a traditional bank, a processing period applies, which requires you to wait up to a few business days before the funds become available. This period can get frustrating when you have to manage sizable and recurring expenses. You can use cashing services to access funds from:
- Personal checks
- Social security benefits
Most stores or financial providers charge a percentage-based fee before you can access your money. The specific fee that applies to your transaction may depend on the following factors:
- The amount you deposit
- Where you cash in your check
- The retailer offering cashing services
Generally, the fee falls between 1% and 12% of the value of the check. Some stores will charge a flat fee in addition to the set percentage already charged. Keep this in mind when considering your options for accessing your funds. The good news is that check cashing services must disclose their fees, so you know what to expect when you go into the store.
How Do Check Cashing Services Work?
Now that you have the check cashing store definition nailed down, it’s time to discuss how the process works. Cashing in your check at a check cashing store is straightforward. The first step is finding a financial service provider near you. If you’re having trouble finding one, look in areas with fewer banks or other typical monetary services.
After choosing your check cashing store, you’ll need to show a government-issued identification before handing over your check. You’ll receive the full amount of the check in cash, minus any applicable fees. Sounds pretty simple, right?
Pros and Cons of Check Cashing Service Stores
A check cashing store is a convenient solution when traditional financial services are not a viable option. However, they are not without their drawbacks. Let’s examine the benefits and disadvantages of using them.
Pro: They Can Help Cover Immediate Expenses
The quicker process can be incredibly helpful when trying to manage expenses that are draining your savings account or putting a financial strain on your life. Think about how often you’ve needed your funds to cover rent, medical bills, groceries, or unexpected expenses that come without warning. With check cashing services, you don’t have to worry about missing payments because your money is on hold.
Pro: Simpler Fee Schedules
Banks often issue multiple fees to account holders, and keeping tabs on them can be challenging. These fees might include those associated with account maintenance, out-of-network expenses, overdrafting the account, and wire transfers.
And those are just the basic fees.
Using a check cashing service center gives you access to a simpler and often more straightforward fee schedule rather than facing ongoing fees applied to your account.
Pro: Check Cashing Service Providers Have Flexible Hours
Since banks follow traditional operating hours that can conflict with your availability, you might have to adjust your schedule before you can cash your check or talk to a representative about concerns.
On the other hand, check cashing businesses are more flexible with their customer service hours. They may also remain open in the evening, making it easier to cash a check after getting off work or handling other responsibilities.
Con: Fees Can Be Substantial
Some cashing businesses impose a high exchange fee, which reduces the amount of money you receive every time you cash a check. Let’s say you cash in a $2,000 check, and the fee is 10% of the total amount. In this case, your fee would amount to $200, which means you’d take home $1,800 at most.
Con: You Get Stuck in a Spending Cycle
Check cashing services can help you address financial problems temporarily, but that doesn’t mean you should rely on them permanently. Eventually, the fees outlined above will add up. As you take home less and less money each month, you may find it difficult to afford your expenses, including housing costs and utility bills.
Con: No Insurance Protection
Check cashing service centers don’t maintain protection under the Federal Deposit Insurance Corporation (FDIC), while the funds stored in federally insured banks are protected (up to $250,000). This means that if your bank fails, the federal government will cover any losses that don’t exceed that maximum amount.
However, since you typically just receive cash from a service center rather than storing it in an account, this concern may not apply.
Are Check Cashing Services Right for You?
Wondering whether check cashing services are right for you? The answer depends on whether you’ve faced difficulty opening a bank account. Some people are not eligible to have bank accounts, making accessing funds paid by check more challenging.
Banks can deny applicants for a number of reasons, including:
- Unpaid fees with another bank
- Identity theft suspicion
- Consumer report errors
- Join account problems
- History of bankruptcy
If you’ve faced setbacks with opening a bank account, check cashing services might be the best option for accessing the funds you earn. You also have to consider whether a bank is close to where you live and work. Some low-income communities are underbanked—meaning fewer federally insured financial service providers are nearby.
If this applies to you, then check cashing services are a feasible solution.
Manage Immediate Expenses with Power Finance Texas
While a check cashing store can provide momentary financial relief, it doesn’t have to be the only financial option. If you’re low on funds and have no check to cash, a check cashing store can’t help, but Power Finance Texas can. We offer personal loans to those who need quick cash.
Our loan approval process is fast and straightforward, with no rigorous qualifications. Plus, we can often deposit the funds within one business day. Apply for a loan to get started.