If you find yourself in a disenfranchised neighborhood you’ll notice a few things: churches, liquor stores, and check cashing places.
It makes sense.
Spirituality is important for so many, liquor is a way to relax for some – but what doesn’t make sense is a large number of check cashing establishments.
This answer lies in the notion that many folks in economically disenfranchised neighborhoods use check cashing places because they can no longer get a bank account.
This seems impossible, but the answer to this lies in overdraft fees. Many banks automatically sign you up for the ability to overdraft your account. This is done to apparently save you from the embarrassment of getting your card declined in the checkout line, at the restaurant table, or the gas station.
However, it lets you essentially borrow money from the bank that you don’t have which can become a huge issue. This issue largely affects those who don’t have the necessary funds and those who make their money primarily in cash and don’t have the regular access or time to get to a bank.
But, overdraft fees add up and fast.
I’ve personally been the victim of them before.
When I was in college, in between jobs, I had plenty of money in my savings, but not enough in my checking. Many of my transactions from earlier in the month went through at the same time, and unknowingly, I continued to swipe my card. When I looked at my bank account, it was hundreds of dollars in the negative.
After having a heart attack and calling my bank, I was still out three hundred dollars. I had the privilege of living with my parents so I only lost out on recreational cash, but many people can’t afford to go through such a trial.
Each $35 dollar overdraft fee can spiral into negatives upon negatives, and it seems nearly impossible to tackle them. So people walk away from their bank account or it’s closed unwillingly. The account goes into collections, their credit drops, and soon, their options are limited.
But what do check cashing businesses have to offer anyone?
Check cashing places, yes, cash your checks. However, they also offer notary services, money transfers, prepaid debit cards, currency exchange, and even payday loans. Each service they offer comes with a very clear and distinct fee. You owe nothing to your check cashing place. The appeal of them is that you are in and out–and once you leave, they have nothing but the money you paid them to do whatever service you needed.
Maybe you don’t trust banks anymore. It’s understandable especially if you’re economically disenfanchised. They hand you so much fine print that your head can spin. If you make a mistake, they tell you that you accepted the consequences of those terms when you were handed your debit card. It’s hard to keep something so important like money in the hands of an establishment that you feel has betrayed you. Bottom line, we all know that banks don’t really care about the individual. They mostly care about what the individual is putting into their coffers, and how they can gain capital from it.
Check cashing places come with a price, yes, but that price is stated upfront. With many folks living check to check, it’s hard to come up with the $200 you might need to open up an account at your local bank. On top of that, going under a certain amount for many accounts ends in a fee. Many people simply can’t afford to just leave money in their account, and they also can’t justify paying a fee every month just to keep it.
The downside of using a check cashing service is that you have no sure safe way to save like that of a bank. Banks have insurance and if the bank is robbed, your money is safe. When you don’t have two pennies to pinch together, and someone steals them from you, you’re back at square one.
Check cashing places aren’t evil and they’re not ideal, but neither are traditional banking institutions. Both have fees, both have challenges, but one is more transparent about them than the other.