How do check cashing places work?

How do check cashing places work?

Check cashing places are legitimate stores which offer financial services immediately and conveniently. The primary services include payday loans or advances, money orders, and check cashing. You will be charged a fee for the use of these services.

Imagine, getting your money today, even when the banks are closed. You can literally walk in with a check and come out with cash.

However, check cashing locations come with a cost, enormous fees.

Luckily for you, I’ll show you how check cashing places work. I’ll show you when you should use them and what some better alternatives might be. You’ll be on your way to getting your check cashed in no time.

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Are check cashing places legit?

Check cashing places are legitimate and provide services to those who need quick check cashing or do not have a bank account. Individuals or businesses can utilize services such as money orders, check cashing, and apply for loans. The main downside to check cashing places are the high fees to use the services.

How do check cashing places work?

Check cashing places work by giving you immediate cash for your check. The check cashing place will verify your identity on the spot and give you the cash equivalent of your check while charging you a fee.

Let’s assume that you’re in need of quick cash, but the bank is currently closed. Alternatively, you might not have a bank account which can cash your check. Your local Moneytree is currently open and is conveniently located near your house. 

Take your $200 check to Moneytree with your identification. Tell the cashier that you would like to cash your check.

The cashier will give you different options to receive your money. Most check cashing places will give you the option to receive your money via:

  1. Cash
  2. Prepaid debit card
  3. Debit card account

Let’s assume that you want to cash your check and receive cash. You live in Los Angeles, so your fee for personal check cashing is 6.99%. Therefore, the cashier would hand you $186.02 in cash and Moneytree would keep $13.98 in fees. 

As you can see, the fees for check cashing are expensive. The main benefit of check cashing places is convenience. In the future, you may want to consider better alternatives, such as:

  • Mobile app or ATM check deposits
  • Opening your own savings or checking account
  • Second chance checking accounts
  • Taking advantage of direct deposit
  • Cash your check at Walmart (typically cheaper)
  • Go to the bank which issued the check and cash the check (typically cheaper)

What do check cashing places verify?

A check cashing place will need to verify your identity and that the check issuer has available funds. Identification, such as a driver’s license, is required to ensure that you are indeed the correct payee of the check. The check cashing place also needs to verify the funds are available so the check doesn’t bounce.

How long does it take for a check to clear at a check cashing place?

Cashing a check at a check cashing store will allow you to have funds available immediately. 

Do check cashing places report to the IRS?

All transactions of $10,000 or more are reported to the IRS. This includes lump sum transactions, two or more transactions in excess of $10,000 in 24 hours or in a 12 month period.

What happens if you cash a check at a check cashing place and it bounces?

In most cases, the check cashing place should be able to verify and stop checks from cashing before they bounce. However, should you have a check bounce you will be notified and are expected to pay the money back along with any applicable fees. The check cashing place make pursue legal action if you fail to resolve the situation. 

What services do check cashing places offer?

Check cashing services include money orders, check cashing, loans, payday loans or advances, and bill pay. You may even be able to add funds to prepaid debit cards and some locations may offer stamps and bus passes.

Most check cashing stores serve individuals and businesses without a bank account or who need immediate and convenient money services.

For example, there are many reasons why someone wouldn’t have a bank account.They may have been bad with finances in the past and had their account closed on them. However, most people still need a place to store their money and want to use a debit card.

A convenient service that some  check cashing places offer include prepaid debit cards. You can take your payroll check and load it onto a prepaid debit card. Now you can spend money just as if you had a debit card with a checking account.

Why are check cashing stores bad?

Check cashing stores are considered ‘bad’ because they charge expensive fees. Most check cashing places charge a percentage of your check, rather than a flat fee. Consistently cashing checks at these stores will make you lose more money than just opening up a bank account or finding alternative means to check cashing.

Let’s assume you cash a payroll check at a check cashing store for a fee of 2%. Assuming your check is $1,200, each check is assessed a $24 fee. Over 26 pay periods in one year, you’ll lose $624 in fees.

In comparison, Walmart charges $8 for checks over $1,000 and $4 for checks under $1,000. Check cashing your 26 $1,200 checks would result in a total yearly fee of $208.

Most people use check cashing stores because of the convenience of being open later than banks. However, most Walmarts with money service centers have expanded hours which you may be able to make.

For example, my local Walmart money center is open from 6 a.m. to 11 p.m. Most people would be able to make it to Walmart within these hours.

Summary: How do check cashing places work?

As you can see, check cashing services provide legitimate services to those who need money quickly and conveniently. Some people who use check cashing places don’t have a bank account. The main downside to check cashing places are the high fees you’ll be charged when using their services.

Check cashing services include money orders, check cashing, loans, payday loans or advances, and bill pay. You may even be able to add funds to prepaid debit cards and some locations may offer stamps and bus passes.

Due to the high fees, you may want to consider the following instead of check cashing stores:

  • Mobile app or ATM check deposits
  • Opening your own savings or checking account
  • Second chance checking accounts
  • Taking advantage of direct deposit
  • Cash your check at Walmart (typically cheaper)
  • Go to the bank which issued the check and cash the check (typically cheaper)

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