Go Broke With — Check Cashing!

Being broke is a temporary situation. Being poor is a state of mind.
— Mike Todd

Another entry in our financial Hall of Horrors — Check Cashing! One of the sure hallmarks of a scary neighborhood — along with bars on residential windows, the constant sound of sirens, and bulletproof windows at gas station booths — are big, brightly colored signs, saying “Checks Cashed! No ID Required!”

Check Cashing storefronts proliferate like rats in blighted neighborhoods in order to feed off the poor. It’s hard to imagine a more cynical, exploitative business.

A Story From my Misspent Youth

Let me tell you a little story about the one and only time I ever walked into one. I was 19, blessed with a 19-year-old’s naïveté, and had my dad’s Christmas present in my pocket — a check for a couple hundred bucks. In other words, I was rich!

I was home from college, visiting family. It was the weekend, and the banks were closed. These were the days before universal ATM access (God, am I that old?), and my bank had no location in town. I was dying to get my hands on the cash for some reason that seemed extremely important at the time, but which I can’t for the life of me remember, now. I’d also, foolishly, allowed my ID to expire. What a pickle!

Then I remembered — the neighborhood Check Cashing place would cash that check, with no ID. Plus, they were open 24/7! Problem solved!

I walked in the door, but before I handed over my precious Christmas check, I had a moment of sanity. I asked the friendly person manning the counter (behind bulletproof glass, of course), “Hey, what’s you guys’ commission, anyway?”

The friendly look on her face changed to befuddlement. “Our what?” she asked. I got the impression that she had never actually been asked that question before. At least not in that way.

“Your commission. You know, what are you going to charge me.”

“Oh, I see,” she said. “We charged fifteen dollars per hundred dollars in the check.”

I blinked. “Wait, what? You charge Fifteen percent?”

“Fifteen per hundred,” she said.

“Which means fifteen percent,” I said.

“If you say so,” she said, and smiled tightly.

I left, wondering in my glorious 19-year-old’s naïveté how such a place could stay in business. How could anyone be so stupid as to pay 15% to get a check cashed? Let alone enough people to allow this place to stay open? 24/7, even?

I then went on and did whatever 19-year-olds do (I’ve long since forgotten), and managed to get through the weekend without cashing the check.

Older and Wiser

My older, wiser, grumpier self has some answers for 19-year-old Sean’s naive questions. First, 15% is pretty typical for these places (yes and no, see update below). As you might have guessed, fraud is pretty common at no-ID check cashing establishments. Guess who picks up the bill for that?

Second, at 19, not cashing my check meant a few less treats during a weekend home from college. To a member of the working poor, however, not cashing a check may mean no groceries for their family. That person may not have a bank account where they can deposit the check come Monday, because no bank will give them one. They may be an illegal immigrant, and thus have no ID they can use to cash their check at a more traditional location.

There are a hundred different reasons why a person who is down on their luck may wind up thinking (usually incorrectly) that they have no other choice. There must be, after all — because there sure are a lot of those places around. Exploiting the poor is a lucrative trade.

And don’t make the mistake of thinking these are mom-and-pop businesses, either. Nowadays, many check cashing storefronts are owned by the very same banks that find reasons to refuse to give the working poor traditional accounts in the first place.

Alternatives

I doubt any readers of this blog will ever find themselves in a position where they absolutely must have a check cashed quickly, and can’t get to a bank or ATM. If it does happen, though, I’m sure it will come as no surprise to you that I recommend other options:

  • Walmart is open 24/7, and will cash payroll and some government checks for up to $1000 for a flat fee of $3, and for up to $7500 for $6.
  • Safeway will often cash non-person checks. Their commission is a little over 1%.
  • The issuing bank, i.e. the bank the check writer used, will usually cash it for you for free if you show up during business hours. This works for personal as well as payroll checks.

All three of these options require an ID and possibly a social security number. If you’re stuck without those, as well (we’re getting more and more far-fetched here, but what the heck), some prepaid card providers allow for direct deposit to your prepaid balance — it can serve as a last-ditch alterative to a real bank account.

Whatever you do, though, don’t let yourself fall prey to a Check Cashing storefront — even if you have to go without treats for a whole entire weekend to avoid it.

I know, things are tough all over.

Update

As James pointed out in a comment below, a number of states now regulate check cashing fees to some extent. According to this site, 24 states now have at least some level of restriction on check cashing fees.

Of the states that regulate, more than half still allow fees of 10% or more on personal checks, but the fee limits tend to be more restrictive on government and payroll checks (which makes sense).

The remaining states still have no limits at all on what fees can be charged, though, so it’s a good idea to find out what the rules are in your particular state.

James is correct that I really should have thought to look this up before posting the original article.

8 Comments

  1. Wow… yet another strange, predatory thing I’ve never heard of, very depressing.

    For as long as I’ve remembered though, every time someone’s given me a check I’ve always just stood there in disbelief at why they were paying me in such a stupid form of money. Luckily its extremely rare so I don’t have to deal with it but its always made me want to just punch the payer in the face and yell “What is this? The 50’s!???”. Maybe I react to these things a little harshly though… but the idea that I have to go somewhere physically to receive money is just ludicrous to me. Likely due to my age… either that or checks just aren’t as big here in Australia as they are there.

  2. You know, at first I really enjoyed this blog but I have to say, the last few posts have been…pointless. The tone is full of contempt and the subject (in this case at least) is something pretty self-evident. I don’t think there’s much benefit in gleefully blogging about how you’re so much smarter than people who use check cashing services. I can almost hear the cackling behind each post.

    And to answer your question of who uses these services: the desperate do.

    • Sean Owen

      Hey Michael,

      You know I woke up this morning feeling pretty much the same way. I said as much to my wife.

      I don’t know if you’ve been reading along the entire time, but I made a pledge to post daily for 30 days. It’s been an interesting challenge, but a number of the posts felt phoned in, because I had to write them quickly at the end of long days.

      When this 30 days is up, I’m going to go back to a (much) less frequent schedule, but write more substantive stuff.

      All that said, regarding this one, my intent was not to cast derision on the people who are forced use these places (with whom I empathize), but on the owners of the places themselves. If I didn’t do a very good job of getting that across, I apologize. This passage was meant to express that:

      “To a member of the working poor, however, not cashing a check may mean no groceries for their family. That person may not have a bank account where they can deposit the check come Monday, because no bank will give them one. They may be an illegal immigrant, and thus have no ID they can use to cash their check at a more traditional location.”

      The later material shifted tones, because I doubt anyone in that situation reads this blog, not because I don’t respect the working poor (I assure you, the opposite is true.)

      The challenge ends in a few days. I do hope you’ll stick around and give it another shot when I return to my normal schedule.

      Thanks for your comment.

      • Sean Owen

        Oh, and I do have nothing but contempt for people who make a living of preying on the poor and the desperate. The contempt was real, I just want to be clear whom it was directed at.

  3. Sean,
    It might be helpful if you did due diligence before publishing any article or thoughts on a subject you obviously know nothing about. I wonder if you did any research at all besides trying to cash a check from daddy.
    If you want some real facts here’s the link that will tell you that in New York the Check cashing rate is capped at under 2%!!!!???? I’m not sure what state your in but all state financial regulators have this information readily available for any to see. Hope you do better research in the future before expressing opinions as fact. That’s what separates a good journalist from a mudslinger. (http://www.dfs.ny.gov/legal/industry_circular/bank)

    • Sean Owen

      While you might perhaps have been a bit more diplomatic about it, you make a good point. I’ll add an update.

  4. Sean, many thanks for your thoughtful response. I think you’re the first blogger I’ve ever seen take criticism in such a thoughtful, healthy way!

  5. Please excuse my stupid question, but this thing starts puzzling me.
    In my entire life, only once did I receive a cheque (the rental car company returned the deposit. That was some ten years ago, nowadays they wire the money back the very same moment you return the car.)
    Yet I keep reading “writing cheques”, “found a cheque in the mail” and so forth. I always thought this to be an idiomatic expression, but this post indicates you Americans really do pay with these paper things?!?

    Why don’t you just do a bank order (preferrably electronic) like everybody else on the planet?
    No offense meant, just wondering.

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