What Is a Check-Cashing Service?

Check-Cashing Services Explained in Less Than 5 Minutes

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Definition

Check-cashing services allow consumers to cash checks without a bank account. They provide easy access to cash for people who may not be able to open a bank account or have one but can't get to their bank when they need money.

Definition and Example of a Check-Cashing Service

Check-cashing services allow you to cash payroll, government, and other types of checks without a bank account. The funds are usually available almost immediately.

The financial service centers that provide these services are represented by Financial Service Centers of America (FiSCA), a national trade association. According to FiSCA, there are approximately 13,000 financial service centers in the United States. These centers conduct over 350 million transactions a year in various products to the tune of $106 billion.

They provide a more limited set of services than traditional banks do but generally offer check cashing along with money orders, electronic bill payments, ATM access services, and payday loans.

Note

While the rare bank may cash a check from a non-customer, usually for a fee, most banks only cash checks from customers to avoid forgeries.

How Does a Check-Cashing Service Work?

Six percent of adults in the U.S. are “unbanked,” meaning they don't have a checking, savings, or money market account. Not having a bank account can occur for many reasons, including having negative items in your ChexSystems report, not wanting to pay the fees that come with a traditional bank account, or facing local bank branch closures. It often necessitates using alternative financial services to complete basic transactions like cashing checks.

Note

In 2019, over half of unbanked adults used an alternative financial service, such as a check-cashing service, money order, or pawn-shop loan. Moreover, 16% of adults were underbanked, meaning they had a bank but also used an alternative service.

Check-cashing services exist to help the unbanked and underbanked convert their paychecks to cash at a convenient time (many are open 24 hours a day) and place (they're located in communities throughout the country). They're offered by retail stores like Walmart, payday loan lenders, and other financial services centers like Amscot. In most cases, they charge you a fee for the service that they're required to disclose, usually a percentage of the face value of the check.

For example, as of March 2022, Walmart charges $4 to cash checks up to $1,000 and $8 for checks over $1,000. While that may not seem like much—just 0.4% or 0.8% of your total check, respectively—other check cashers may charge more. Amscot charges up to 2.9% of the value of government checks, 2.5% of tax-refund checks, and up to 4.5% for other payroll and handwritten checks. If you cash a payroll check for $1,000 at Amscot, you could pay as much as $45. If you use the service to cash 26 paychecks per year, you could lose $1,170 in fees.

Note

Check-cashing fees eat into your earnings. If you need one, use it sparingly and look for low-fee services.

Pros and Cons of Check-Cashing Services

Pros
  • Provide financial services to the unbanked and underbanked

  • Make money available almost immediately

Cons
  • May charge extremely high fees

  • Easy to get stuck in a cycle

  • Can leave consumers stuck using non-traditional financial services

Pros Explained

  • Provides financial services to the unbanked and underbanked: Check-cashing services provide customers with the ability to cash a check when they may not otherwise be able to open a bank account or access one when they need it (when traveling or cashing a check after business hours, for example).
  • Makes money available almost immediately: Additionally, for people who may be living paycheck to paycheck or have a rare financial emergency, check-cashing services can put money in your hands almost immediately. There's no need to wait one or two days for your money to clear from a bank account.

Cons Explained

  • May charge extremely high fees: Check-cashing services often charge extremely high fees, which can reduce the amount of your hard-earned money you get to keep. Banks or credit unions usually don’t charge account holders for cashing checks. Since banks save you money on cashing checks in the long run, it would be to your advantage to open a bank account as soon as you can. It may help to repay any outstanding balances you owe and report erroneous negative items.
  • Easy to get stuck in a cycle: Sometimes, check-cashing fees can get so out of hand that individuals can't pay for vital expenses (rent, food, or transportation, for example). As long as the dependency on quick cash persists, a person might continue to use a check-cashing service and get stuck in a cycle.
  • Can leave consumers stuck using non-traditional financial services: The ease and convenience of check-cashing services can make a person resistant to ever opening a traditional bank account or benefiting from the many free services and other benefits they offer.

Key Takeaways

  • A check-cashing service provides a way to convert checks to cash if you're unable to open a checking account because of past financial problems or can't reach your bank and need cash fast.
  • It makes funds available almost immediately but comes with high fees that can erode your earnings.
  • It should only be a stop-gap measure until you find yourself on better financial footing and can get a bank account.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Financial Service Centers of America. "FISCA History."

  2. HelpWithMyBank.gov. "I Went to a Bank to Cash a Check That Was Drawn on the Bank. I Do Not Have an Account With the Bank and They Refused to Cash the Check. Can It Do This?"

  3. Board of Governors of the Federal Reserve System. "Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020," Page 27.

  4. Consumer Financial Protection Bureau. "When Can I Be Denied a Checking Account Based on My Past Banking History?"

  5. National Consumer Law Center. "How to Save Money and Avoid Theft: Cashing Checks and Opening Bank Accounts," Page 2.

  6. Walmart. "Check and Card Cashing."

  7. Amscot. "Check Cashing."

  8. HelpWithMyBank.gov. "I Deposited a Local Check. When Will My Funds Be Available/Released From the Hold?"

  9. Experian. "How to Clean Up a ChexSystems Report."

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