Depending on where you live, you could pass several check cashing stores every day. Their neon glowing signs and flashing lights advertise that they are fast, easy and efficient ways to get cash, but in actuality, they are a terrible investment and should only be used when you don’t have any other options.
How check cashing companies work
Simply put, check cashing companies charge you for your own money.
Check cashing companies charge a fee to cash checks for individuals; sometimes just a flat amount, but most likely a percentage of the total amount of the check.
Say, for example, you have a paycheck for $1,500 that you want to cash at a check cashing company. If this company charges a 5% fee, which is common among check cashing companies, you would be paying $75 for access to $1,425 of your own money. Even if the check cashing company charged only a 1% fee, you would still be paying $15 just to get money you already own.
These fees can easily be avoided just by going to a bank.
Benefits of banks
The ideal way to cash checks is to use a bank. If you have an account at a bank, you are able to cash checks for free without paying any fees at all. Even if you do not have a bank account, most banks will allow you to cash checks that they issue themselves for no charge.
So if you don’t have an account at a bank, be sure to check what bank the person giving you the check used. You should be able to visit any branch of that bank and get cash without paying any fees. Check cashing places may be convenient if you don’t have a bank account or live far from your nearest bank, but look at it this way:
Depending upon the amount of the check you are cashing and the fees of your usual check cashing place, it may actually be cheaper to take a bus or cab ride to and from your nearest bank than to pay the gigantic fees you would be giving the check cashing companies.
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