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Understanding Check Cashing: Pros and Cons

Check cashing services provide a way for customers to quickly and easily access cash in exchange for a fee. These services are popular among people who do not have a bank account or cannot access traditional banking services. Check-cashing providers offer a variety of services, including cashing checks, payday loans, and money transfers. They are often open outside of traditional banking hours, making them convenient for people who work non-traditional hours. Some check-cashing providers have multiple locations, allowing customers to cash a check or get a loan or money transfer at a location that is convenient for them. For many people, check-cashing services provide a necessary and useful financial service. However, these services also come with drawbacks, including high fees and potential fraud. It is important for consumers to understand the pros and cons of using check-cashing services and to explore other financial options that may be more beneficial in the long run.

How Check-Cashing Services Work

Check-cashing services are designed to be simple and easy to use. Here’s a breakdown of how check-cashing services work:

  • The customer brings a check to the check-cashing service provider
  • The provider verifies the customer’s identity
  • The provider examines the check to ensure that it is valid
  • The provider deducts a fee from the amount of the check
  • The provider gives the cash to the customer

Some check-cashing providers also offer additional services such as payday loans or money transfers. These services typically involve additional fees and may have different requirements compared to check-cashing services.

If you are considering using a check-cashing service, it is important to understand the fees and requirements associated with the service. You should also consider alternative financial options, such as opening a bank account or using a mobile banking app, which may offer lower fees and more convenience in the long run.

What are some disadvantages of using check cashing services?

High fees: Check cashing services charge a high fee for their services, which can be up to 10% of the check amount.
Risk of fraud: There is a risk of fraud when using check cashing services as they may not have proper verification procedures in place.
No access to bank account: Using check cashing services means you don’t have access to a bank account and may not get some of the benefits that come with it, such as overdraft protection, online banking, and direct deposit.
No credit building: Using check cashing services does not contribute to building a credit history, which can be damaging in the long term.

It’s important to weigh the benefits and drawbacks of using check cashing services before deciding to use them. If you have access to a bank account, it might be a better option for you.

The Pros of Check Cashing

There are several benefits to using check-cashing services, including:

  • Convenience: Check-cashing services are often located in convenient locations, such as grocery stores, making it easy for customers to access cash when they need it.
  • Speed: Check-cashing services can provide cash in a matter of minutes, which can be crucial for those who need cash quickly.
  • Accessibility: Check-cashing services are available to everyone, regardless of their credit score or banking history.

According to a study by the Federal Deposit Insurance Corporation, around 7% of households in the United States are unbanked, meaning they do not have a bank account. For these households, access to check-cashing services can be vital.

Some check-cashing providers also offer additional services, such as payday loans and money transfers, which can be convenient for customers who need financial assistance.

Here is a table comparing the fees of different check-cashing services:

Check-Cashing Service Fee per $100
ACE Cash Express $6
Check Into Cash $5
Walmart $4
Bank of America $8

It is important to compare fees and services from different providers before deciding which check-cashing service to use.

What are the advantages to using a bank rather than a check cashing service?

Using a bank rather than a check cashing service can provide several benefits, including:

  • Banks typically offer a wider range of financial services compared to check cashing services.
  • Banks have the ability to deposit funds directly into your account.
  • Banks offer higher FDIC insurance, which means your money is safer.
  • Banks often have more convenient hours and locations.

Overall, using a bank can be a more secure and convenient option for managing your finances. If you’re interested in finding the best bank for your needs, check out

The Cons of Check Cashing

While check-cashing services can be convenient, there are also some drawbacks, including:

  • High fees: Check-cashing services charge fees that can be higher than traditional banking fees, which can add up over time.
  • Missed opportunities: People who regularly use check-cashing services may be missing out on the benefits of having a bank account, such as access to credit and the ability to earn interest on savings.
  • Risk of fraud: There is a risk of fraud when using check-cashing services, as some providers may not be reputable or may charge hidden fees.

In addition, check-cashing services are not regulated in the same way that banks are, which means that customers may not have the same legal protections or recourse in case of errors or fraud.

While some people may prefer to use check-cashing services, it is important to remember that there are other financial options available, such as opening a bank account or using online banking services. These options may come with their own fees and drawbacks, but they can also provide more long-term benefits, such as building credit and saving for the future.

What is a disadvantage to using a check cashing service?

Disadvantage Explanation
High Fees Check cashing services charge high fees for their services which may not be worth it for individuals with bank accounts.
Limited Services Check cashing services may only cash certain types of checks and have restrictions on the amount of cash they can provide.
No Build Up of Credit Using check cashing services does not build up credit history which can be important for future financial needs.

Using a check cashing service may be convenient for individuals who do not have a bank account, but it is important to understand the potential drawbacks. Individuals should consider their options carefully and weigh the costs and benefits before using a check cashing service.


In conclusion, check-cashing services can be a helpful option for people who need to access cash quickly and do not have a bank account, but they do come with fees and risks. For those who are able to open a bank account, it may be beneficial to consider doing so, as banks offer more protections, such as deposit insurance, and can help customers build their credit and save for the future. Online banking services can also be a convenient option for those who prefer to do their banking digitally. Regardless of which option someone chooses, it is important to be informed about the fees and risks associated with each and to choose the option that best fits their individual financial needs and goals.