The FDIC estimates that approximately 10 million US households fall within the category of unbanked, or those who do not rely on a traditional banking institution to handle their financial transactions. Despite the growing number of people who are abandoning their bank accounts, there are skeptics who remain leery of check cashing centers. However, check cashing remains a popular option among the unbanked and underbanked, as well as those who use check cashers for services in addition to check cashing.
According to a study conducted by WalletHub, the average bank account holder pays nearly $200 in fees every year and the average checking account has 22 various fees. With statistics like these, it’s easy to see why banks are falling out of favor with many consumers, especially millennials.
MoneyRates.com reported that free checking account offerings are at an all-time low and very few accounts are completely devoid of monthly maintenance fees. Further, the average monthly checking account fee has risen to nearly $13, a little more than $150 annually. The rising cost to do business with a bank is gradually pushing consumers away, leading them to utilize check cashing establishments where they can perform a variety of transactions with upfront pricing.
These high account fees, coupled with the low interest rates currently offered on savings accounts, makes it clear that using a check cashing store is a viable alternative to traditional banks. Here, we’ll explore some of the top reasons consumers are abandoning their banks.
More than Just Check Cashing
One of the main reasons people are choosing check cashing stores over banks is the sheer number of services offered. Check cashing establishments typically cash a variety of checks, including but not limited to personal checks, cashier’s checks, money orders, payroll checks, government checks, and even handwritten business checks. While banks also cash these types of checks, the rules and fees associated with doing so constantly change, and some institutions will place holds on the funds. This can present major cash flow problems for small business owners and others who need immediate access to their funds.
Additionally, check cashing establishments offer a range of other convenient services including money transfers, which allow customers to send money to anyone domestically or internationally; short-term loans; copying and fax services; and prepaid debit cards, to name a few.
Alternative to Banks
The majority of people use their bank accounts for the same reason: to have their paycheck direct deposited, then pay bills or other expenditures from a debit card, check, or cash withdrawn from the account. For many, this seems routine and the thought of an alternative may never cross their minds. However, there are several reasons why millions of the unbanked and underbanked shy away from traditional banks.
According to University of Pennsylvania Professor Lisa Servon, consumers who use check cashing services do so purposefully. Her book, entitled The Unbanking of America, stated that the main reason individuals use check cashing services is that they have had a bad experience with their local bank. From excessive overdraft fees to unreasonable hold times, the consumers interviewed felt that maintaining a checking account was more trouble than it was worth, and often more expensive than the alternative. In some cases, the bank would close the customer’s account, leaving the person with no choice but to use alternative financial services.
In either case, consumers have found that check cashing services are able to meet their needs. Fees for services are clearly displayed, customer service is better overall, and a wide range of convenient services are offered, often for lower prices than banks. In addition, check cashing stores usually have several locations in major metropolitan areas with extended operating hours. Some are even open 24 hours a day.
Critics argue that check cashing stores are more expensive than banks and that only consumers who lack money management skills frequent these establishments. However, this assertion is largely unfounded and, in fact, banks have been shown to be extremely costly to consumers. Nowadays, banks seem to charge fees for almost every transaction, including monthly maintenance fees, ATM fees, certified check fees, and more. Over time, these fees can really add up. Banks don’t usually prominently post their fees, opting to instead hide fee structures in brochures or buried deep on the bank’s website. Customers are often surprised when they receive their statement or a transaction is declined. Using a check cashing establishment can eliminate these surprises.
Don’t Be Afraid to Shop Around
As with anything, using a check cashing business for financial transactions is a personal decision. When making the choice, consumers should consider what they find most important. In today’s world, there are a lot of options for consumers, so no one should feel stuck with one particular financial entity. No option is perfect, so consumers should always take the time to do their own research and weigh the pros and cons. For those looking for convenience, friendly employees, an access to a variety of services, a check cashing center may be the best choice.
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