by Franco Folini
What are the options for the roughly one in three Americans who need to cash a check, but don’t have a bank account? Either by choice or necessity, these “underbanked” individuals don’t use traditional banking. But they regularly have checks that they need to cash. (Also see our article on Why don’t people open bank accounts to cash checks?)
You have three options:
1) BANK — The issuing bank (or bank that is printed on the check), will cash the check. If Bank of America issued a paycheck on behalf of ABC Company to Joe Smith; Joe could take that check to any Bank of America location to cash it. He would need a driver’s license or some other form of identification.
2) CHECK CASHING STORE – these retailers specialize in alternative financial services. Cashing checks, issuing money orders, bill payment, payday loans, etc – for consumers who do not have a bank account.
3) RETAILER – some Grocery stores, Convenience stores, Liquors stores, etc. offer check cashing services. On average their check cashing fees are lower; in the hopes you’ll buy stuff!
A little about check cashing fees…
It is a very competitive business, so check cashing fees can vary substantially by location. Grocers often charge 1-2%, and some even offer free check cashing to customers who have a loyalty card. Check cashing establishments which offer extended hours make you pay for that convenience by charging higher fees (to offset their risks) anywhere from 2-10%. Many banks have check cashing fees, too!
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I would like you to know of a situation I had with Bank of America in Lacey, WA. I went there to cash my paycheck. Due to the fact I did not have an account with them, I was escorted out of the teller line and told to “wait for a personal banker”. As there was several people waiting already, I asked how long they had been waiting. A woman who was next stated she had been waiting over 1-1/2 hours.
Needless to say I walked out and went to a check cashing store. It may have cost $20 to cash my paycheck, but I didn’t have to wait have the day or be treated like unwanted trash.
Certegy provides Walmart with their check cashing guarantee. Rather than going to Walmart which can be a slow crowded and painful wait since the customer service desks are always right at an entrance I use a local grocer when given an out of area check with no local bank branch to cash at.
There is a fourth option for payroll checks since they can be direct deposited to a good no or low fee prepaid card.
Bob you make a good point, that consumers can load the check cashing value onto a prepaid card. Thanks for making that clear; although you’ll still need to go to a check cashing establishment or grocery to get value loaded onto the card.