For the majority of Americans, the ability to cash to cash a check is not something they think about on a regular basis. However, according to the FDIC, 7 percent of households in the US don’t have traditional bank accounts as of 2015. For these individuals, cashing a check can be challenging.
These individuals are referred to as unbanked, while those who maintain a bank account but still use alternative financial services such as check cashing services are considered underbanked. Here, we’ll discuss how the unbanked and underbanked can cash checks as well as take advantage of some of the other services offered by check cashing establishments.
Check Cashing Stores
When a person without a bank account needs to cash a business or personal check, one of the first bank alternatives to consider is a check cashing store. These businesses offer a wide range of services but are primarily used to cash various types of checks. Usually, prices and fees are clearly posted and are uniform for all customers and there are no confusing documents that only apply to certain customers, meaning everyone pays the same amount. Some check cashing stores charge a fee based on the percentage of the check, while others charge a flat fee. Types of checks cashed include, but are not limited to, payroll checks, personal checks, and business checks.
One of the main benefits of using a check cashing store is that customers get access to their funds the very same day. This is much different than cashing a check at a bank, where customers can be subjected to long lines, restrictions, and check holds. Many banks will not cash a check if the customer does not have an account and hold times can vary from one to several days. If a person needs access to their funds quickly, taking a check to the bank is not the best option. For customers who don’t maintain a large enough balance, banks and their fees can pose a real problem. For this, and many other reasons, using a check cashing service can be preferable.
Not Just for Cashing Checks
Although 35 million people in the United States use check cashing services each year, there are many more reasons for them to choose this type of business over a bank. For those who aren’t familiar, check cashing establishments handle a range of financial and convenience transactions. In addition to extended hours and more locations than most banks, check cashing stores also allow customers the option to complete all of their transactions in one visit.
Some of the frequently-used services at a check cashing store include money transfer services, purchase of postage stamps, and even title loans. Additionally, customers can make bill payments and purchase money orders, which function similarly to personal checks.
In addition, according to research completed by New School University professor Lisa J. Servon, check cashing stores are also preferred for their focus on customer service. Compared to banks, customers believe that check cashing establishments do more to establish a rapport with their customers.
Other Check Cashing Alternatives
For the unbanked and the underbanked, check cashing stores aren’t the only ways to get quick access to funds. Many of today’s prepaid cards offer direct deposit, which is convenient for those who want access to their paychecks faster. Some employers even use prepaid debit cards as the sole method of paying employees, which saves them money as well.
Another way people can use prepaid accounts to cash checks is via mobile deposit. Most popular prepaid cards have associated apps with features like person-to-person payments and mobile deposit. The cardholder can simply take a photo of the front and back of the check and then the money is loaded directly to the prepaid card. Fees for these services vary, but mobile apps give cardholders the chance to access their money quickly.
Several major retailers also have begun to offer check cashing services right in the store. This helps customers save time and helps stores to increase business. There has even been talk of bringing check cashing services to local post offices. According to a report released by the United States Post office (USPS) Office of The Inspector General, (OIG), postal banking could be the next step to providing Americans with more financial choice. The report entitled, The Road Ahead for Postal Financial Services, outlined that the implementation of such a service would not only help USPS’ bottom line, but could also be a valuable service to millions of unbanked individuals.
According to Financial Service Centers of America (FISCA), non-bank financial services firms such as check cashing stores represent approximately 350 million transactions, or $106 billion per year. Traditional banks have proven to be less-than-ideal for customers who need quick access to funds or those who complete their financial transactions outside of traditional banking hours. The reasons discussed here make it clear that consumers have many choices when they need to take care of financial business and check cashing stores are one of the best options.
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