Check-cashing businesses are more popular than ever, and it is estimated that over 150 million checks valued in excess of $100 billion are cashed in the United States every year. According to Financial Service Centers of America, Inc. (FiSCA), check-cashing establishments cash about $60 billion in checks annually. The figure represents one of the most significant increases in recent decades.
Many unbanked or underbanked individuals prefer to use alternative financial providers for all of their financial transactions, if possible. Since unbanked individuals often have low incomes, they are unable to sustain a checking account due to the high bank fees or minimum balance requirements.
Why Check Cashing Is So Popular
While check-cashing businesses generally charge a nominal fee, consumers appreciate the value of the services that they offer. Many believe that the convenience, consistency, and ability to obtain their funds immediately greatly outweigh the small fee that they pay to cash payroll, government, insurance, and other types of checks. Some consumers may prefer check-cashing establishments to banks because banks typically will not cash checks for those who are not their customers. In addition, banks sometimes even make their own customers wait for a portion of their money to become available. If customers find themselves in an emergency situation, then waiting days for their money to become available can be a significant deterrent to using a traditional bank.
With prepaid cards being so popular and direct deposit serving as the preferred method of receiving wages and other types of compensation, some may think that check cashing is becoming overshadowed. However, nothing could be further from the truth. Check cashing has recently experienced a resurgence, not only among consumers, but among business owners, as well. In the following, find out how check cashing can help both consumers and business owners to accomplish their goals.
In recent years, check cashing has grown rapidly for a variety of reasons. One of the chief reasons is that banks are downsizing and closing those branches that have less foot traffic, leaving consumers with fewer options within their own neighborhoods. Another reason why check cashing has become so popular is due to the rising fees being charged by banks. While check cashing is generally not free, it’s often cheaper to pay a small percentage of your check than to pay overdraft fees or monthly account maintenance fees to a bank.
The Benefits of Check-Cashing Businesses
Many check-cashing businesses also offer many other financial services such as prepaid debit cards, payday loans, cash advances, lines of credit, and bill payment services. Customers have the ability to complete a variety of financial transactions in one stop and receive their cash on the spot.
Another reason for the popularity of check-cashing businesses is that they offer more flexible hours than traditional banks. Check-cashing businesses are generally open long after traditional banks are closed. Most of these businesses welcome customers on weekends and evenings.
Check cashing has also grown in popularity due to a higher number of people with lower incomes. In addition, there has been an increase in bankruptcies and a rise in credit card debt.
Other benefits of check-cashing businesses include the fact that most of them will cash your check on the same day, and they do not have a holding period. Moreover, check cashing is a quick and easy process in which customers typically are only required to bring a form of identification along with their check.
Businesses Can Consider Adding Check-Cashing Services
While check cashing offers many advantages to customers, it can be beneficial to business owners, as well. In terms of business strategy, going into check cashing is desirable for a variety of reasons. Some business owners are interested in the opportunity to provide check-cashing services because they recognize how fast the industry is growing. This growth translates into increased foot traffic, and those who already operate convenience stores or other similar retail establishments can add check cashing in order to diversify the range of services they offer.
Setting up your business to offer check-cashing services can also open the door to a variety of other financial services technology. For example, once business owners begin offering check cashing, they may also consider providing prepaid debit cards, wire transfers, money orders, and other financial services. In addition, once customers are in the door, they will be more likely to purchase other services.
A recent report by Accenture that examined alternative banking and how it's viewed indicated that approximately 72 percent of consumers ages 18 to 34 would be very likely to complete financial transactions at places that they already frequent, including convenience stores. A slightly lower percentage of customers ages 35 and older also showed a similar willingness. Although this is was only one study, the numbers are promising for business owners who may be on the fence about adding check cashing to their lineup of services.
More importantly, if you are a brick-and-mortar retail store, adding check-cashing services will cost you very little, but can yield significant profits. The overhead is often close to zero, and estimates indicate that profits could be in excess of $4,000 for every 350 checks cashed.
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