Check cashing services can be simply described as the act of converting personal, government, and business checks at a discounted price. One can do it through their own banks, with other people, via stores and shops around the area, and with companies offering this type of service. Generally, the reason for converting into cash is due to convenience. It has become very popular especially for those belonging in middle or lower class of society. For these people, check cashing is one of the ways to get their money instantly without going through rigid processes such delayed clearing, falling in line, and submission of several documents just to convert check into cash.
One of the favors that this type of access to cash offers is that it serves millions of people who do not own a bank account. Some of the reasons why people do not possess bank accounts is that they do not have money to leverage as initial deposits. The required maintaining balance is also a big turnoff for these people as they are penalized when they fail to do so. In addition, there are lots of fees involved when transacting to a bank. And most of all, it is a reality that banks do not really want to capture daily or monthly earners as a huge number of clients will mean a similarly large administrative expenses on the part of banks.
Another favor that check cashing do to people is that they do not have to follow banking hours just to encash the check. There are many check conversion kiosks, shops, and others that have earlier business hours, thus, people can immediately attend to problems that need cash to be solved. They can pay for groceries early in the morning by just presenting the check and filling out forms for verification and clarification. An added bonus is that even if the check is post-dated, check cashing companies will accept it especially if it is issued by the government, insurance, and company payroll checks.
The average interest rate levied on check cashing is between 5-18 percent. While it might be perceived as quite high, banks offer more or less the same rate because you have to factor several fees when you convert your checks and you do not own a bank account. Moreover, there is a clearing period involved when the depository bank is different from where you want to encash the check. Thus, it is a big favor for people who can immediately have cash without resorting to loan sharks or travelling to other areas because the depository bank does not operate in their location.
Lastly, these check cashing companies do offer other services as well which people might be interested to use such as money transfer, photocopying, other administrative services, faxing of documents, and even act as courier for your important documents. It is indeed another favor for everyone as they do not have to hop from one establishment to another in order to finish the day’s business.
So, how can one say that companies offering check cashing services exploit people when they provide numerous favors to people?