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Check Cashing
Services with
Pros and Cons

Check Cashing Services with Pros and Cons

What is a check-cashing service?

While you may not be familiar with a check-cashing service, you’ve likely passed by one of these places that will happily handle your check needs. 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 13,000 locations across the country. A lot of people put a lot of money through them, too. FISCA’s data indicates that they serve more than 30 million customers each year and cash more than $58 billion of checks.

How does a check-cashing service work?

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.

Fee examples from some popular check-cashing options

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.

  • Moneytree – 1.99 percent of the payroll check amount, plus a $1.49 fee if it’s more than $20
  • Amscot – Tiered system for local payroll checks, starting at $3 and ranging to $14.95 for a check just under $1,000; 2 percent of the amount for anything larger
  • PLS – 1 percent of the check amount + $1 for in-state payroll checks and government benefit checks; all other checks are subject to a 2.25 percent fee.

While many locations display their fees next to the cashier window, tracking down the fees you’ll pay for cashing a check before actually going to the retail location can be tough. 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.

Pros Explained

  • Provides financial services to the unbanked and underbanked: Check-cashing services provide customers with the ability to cash a check when they may not otherwise be able to open a bank account or access one when they need it (when traveling or cashing a check after business hours, for example).
  • Makes money available almost immediately: Additionally, for people who may be living paycheck to paycheck or have a rare financial emergency, check-cashing services can put money in your hands almost immediately. There's no need to wait one or two days for your money to clear from a bank account.

Cons Explained

  • May charge extremely high fees: Check-cashing services often charge extremely high fees, eating into your earnings. Banks or credit unions usually don’t charge account holders for cashing checks. Since banks save you money on cashing checks in the long run, it's to your advantage to clear up your ChexSystems report so you can open a bank account. Repay any outstanding balances you owe banks and report erroneous negative items to make it easier to get a bank account.
  • Can perpetuate the cycle of poverty: Sometimes, check-cashing fees can get so out of hand that individuals can't pay for vital expenses (rent, food, or transportation, for example). As long as the dependency on quick cash persists, a person might continue to use a check-cashing service and remain in poverty.
  • Can leave consumers stuck using non-traditional financial services: The ease and convenience of check-cashing services can make a person resistant to ever opening a traditional bank account or benefiting from the many free services, stability, and other benefits they offer.