Have you ever considered using check-cashing services in California? These services are a convenient option for the unbanked (doesn’t have a bank account), underbanked (has a bank account but prefers alternative financial services) people, and those who need quick cash right away.
According to the FDIC Survey of Household Use of Banking and Financial Services, an estimated 5.4 percent of U.S households (7.1 million) are unbanked in the United States, and 13% of Americans are underbanked. Having limited banking options, these people don’t have any choice other than relying on the check cashing service providers.
Thus, check cashing establishments in America serve an estimated 30 million consumers by offering immediate assistance. Read on to learn more about check cashing and the benefits and drawbacks of this service.
What Is a Check Cashing Service?
Check cashing services do precisely what their name implies: they allow unbanked and underbanked consumers to cash their checks. Check cashing firms are not banks but alternative financial service providers that sell money orders and payday loans. Such services are readily offered in California, the United States. According to FISCA (Financial Service Centers of America), over 13000 such organizations provide alternative financial services and cash more than $58 billion in checks each year.
About Cashing a Check: Processing
Check cashing services provide quick assistance to people who need to cash a paycheck, IRS refund, Social Security, or other checks. Though in some stores, you may be required to fill in a form, the process of cashing a check is simple:
- Go to the check-cashing location
- Show your check and ID
- Sign your check
- Pay a fee and take your cash
Dealing with banks, you may not be able to access funds for up to three business days, while these service providers almost immediately turn your checks into cash.
Check Cashing Services: Benefits and Downsides
If you hesitate to choose these services, here are some advantages and disadvantages of check-cashing services in California to help you make informed decisions.
When to Use Check Cashing: The Pros
Sometimes, having on-hand cash may be needed. Here is when check cashing services come in handy.
1. You don’t have a checking account.
The most significant advantage of check-cashing services is that they are available to consumers who do not have a bank or savings account. You may dislike banks or have problems with them (such as bad payment history or overdrafts), and the banks will not provide you with an account. Check cashing services are helpful in such situations, but they are also required.
2. Want to get money faster
Despite the widespread perception that check cashing services are designed to give a helping hand to unbanked people, there are still people who find these services helpful. According to the Federal Reserve report, 13% of people who has a bank account use check-cashing services. Here a question arises, what makes these services so appealing? The answer is obvious: convenience and speed. Check cashing services are faster as compared to banks. People in need of quick cash can’t wait several days to clear a check at a bank.
3. Need to cash a check in odd hours or are in unbanked communities
Unlike banks, companies offering check cashing services may be open in late or early hours. What is more, in poor or rural areas where there are no banks, these services may still be available.
As you can see, check cashing services may prove to be a useful financial tool for individuals who are unable to open a bank account and those who value speed and convenience. However, be informed that check cashing services have drawbacks. Therefore, consider the pros and cons of check-cashing services before taking avail of them.
The Drawbacks of Check Cashing
The weak sides of check-cashing have their cons that embrace:
1. The higher fees
Some check-cashing companies may charge exorbitant fees for their services. In addition, some companies entice you with lower costs; however, they might have hidden fees. Depending on the place, these services charge from one dollar to 2% of the check amount. Though these services may help unbanked people, some of the money will go to a service just to cash a check. Therefore, it is advisable to compare and understand the fees before using these services.
2. Not building a credit score.
Check cashing services can’t build you a credit. You will spend cash, and it will not be deposited in your checking account and consequently is not recorded. Though these services might be ideal for people with bad credit scores, they are not a good solution for those interested in building a credit score.
3. The lack of Federal protection
Check cashing establishments cannot guarantee the security of your funds in the same way that banks can. If a bank fails to pay you, the government will compensate you for up to $250,000 in losses. So while check cashing services are convenient, there is no continuous protection.
The majority of check-cashing companies also provide payday loans. When your bill is due soon, these offers may appear quite enticing; nonetheless, you should consider twice before relying on these borrowings.
Check cashing services might be pretty helpful for clearing a check in a hurry. However, these services will not help you develop credit and should not be relied on in the long run. Using the service on a one-time basis when the need is excellent may be advantageous, but don’t forget about the increased rates that come with the convenience and quickness of these services. If you select check-cashing services, we strongly advise you to review and compare the prices to get the best check-cashing company.