Which of the following statements about check cashing companies is false?
What to know about using a check cashing company. Although these services bring about handy solutions, it is crucial to learn how they work in order to make associated decisions. Check cashing companies have an alleged agenda that they may raise the cost of these services as they can be regulated like banks. But is that true? Let’s dissect the usual statements — then determine the false ones.
Getting to Know Check Cashing Companies
T have any questions about borrowing, including check cashing companies, you can reach us at 732-525-8777. These companies serve a range of customers, from the unbanked to the underbanked to those who need to access their cash quickly. But it’s not just about convenience — it helps to understand how they work before you use their services.
Statements Regarding Check Cashing Companies
For the most accurate, balanced discussion of check cashing companies, this should be the starting point, looking first at the most common conditions under which that cash at the check-cashing counter may appear as ‘debt’:
- They charge low fees.
- This gives you instant access to cash.
- They are subject to government regulation.
- So they can be a cheaper way to cash checks.
Now let’s look at each of these statements and see which are true and which are false.
They Charge Low Fees – False
This statement is false. Of course, check cashing companies charge much higher fees than banks. There are several different ways these fees could be structured:
A percentage-based fee, typically between 1 to 3%, reviewed quarterly.
A fee based on a percentage, which can be between 1 percent and 12 percent of the value of the check.
So, for instance, if you were to cash a $1,000 check, and the company takes a 5% haircut, that’s $50 — and that’s just to access your own money. This is a significant loss compared to banks, where depositing account holders can generally cash checks free of charge.
They Give You Instant Access to Cash – True
This statement is true. Instant access to funds is one of the biggest benefits associated with check cashing services. Check cashing companies, unlike traditional banks, do not typically hold checks — particularly when it is a large sum — and offer cash immediately.
This is especially useful for those who:
Requires cash straight away and can not spare for financial institution control times.
- Do not have a bank account.
- Regularly get paid by checks like freelancers and gig workers.
- Yet this costs, so while convenient, it is an expensive option.
- They Are Regulated by Federal Agencies — Partly True
It is partially true, but that is a big part of the reason. Check cashing firms aren’t limited in the same way banks are federally regulated. Instead, they’re regulated on the state level, so rules and protections can vary widely from state to state.
Some states have strict laws on:
- Maximum fees they can charge
- Licensing requirements
- Consumer protection policies
Others have loose rules that permit some check cashers with little scrutiny. The regulation, or lack thereof, can lead some check cashing services to be riskier than others.
They’re a Cheaper Way to Cash Checks — False
This statement is false. Check cashing services typically charge steep fees and are not a cost-effective way to access your money.
Here’s a comparison:
Service Type
Cost to Cash a $1,000 Check
Traditional Bank
$0 (for account holders)
Retail Stores (Walmart, Kroger, etc.)
$4 – $8
Check Cashing Companies
$20 – $120 (2-12% fee)
As you can see, banks and some retail stores offer significantly cheaper alternatives to check cashing services.
Getting Paid on a Friday: My Personal Experience with Check Cashing Services
I once needed some cash, and it was Friday, and my bank was already closed. A friend recommended I use a check cashing service close by. I figured the whole thing would be fast and easy when I walked in—until I hit the fee structure. I was cashing a $500 check and they charged me $25. That was 5% of my money evaporated just like that!
It has been a painful lesson in the true price of convenience. As a result, I now know to plan ahead and have access to my money without incurring unnecessary fees.
If you’re using check cashing services regularly, use these as alternatives:
Open a Bank Account
Most do not charge account holders to cash a check, but there are some exceptions. Some banks provide second-chance accounts that allow you to access their basic banking services, even with bad credit.
Use a Prepaid Debit Card
Certain prepaid debit cards let you deposit checks and get to your money quicker than with banks. Just watch out for any related fees.
Retail Check Cashing
Major retail chains do have check-cashing services, however, and typically offer better rates than standalone check-cashing businesses: Walmart, Kroger and 7-Eleven will cash your check for a fee that’s exponentially lower than what you might pay at a check-cashing business.
Conclusion
Check cashing companies allow funds to be available immediately, but high fees and lack of regulation are the downside. If you’re one of those people who frequently has to cash checks, looking for alternatives, such as bank accounts, prepaid debit cards or retail stores, can save you money long-term. So, next time your tempted to use a check cashing company, ask yourself: Is the convenience worth the cost?