If you’re like most people, you probably have mixed feelings about using a cheque cashing service. Lots of people use cheque cashing stores as their only “bank” since they don’t hold a traditional bank account elsewhere. Some people use cheque cashing services as a last-resort. There are both pros and cons to using this option for their financial needs, so if you’re interested in learning more, read on.
1. What is cheque cashing, anyway?
A cheque cashing service does exactly what it sounds like: people take in cheques they’ve had written to them and walk out a few minutes later with their money, minus a cheque-cashing fee.
2. What kinds of cheques are processed?
Most cheques are accepted and cashed by the cheque cashing industry. These may include, but are not limited to, government cheques, payroll cheques, personal cheques, small business cheques, insurance cheques, and money orders. Some places will not accept personal cheques to avoid losing money if the cheque bounces.
3. How much does it cost?
Some businesses charge a flat percentage rate of the cheque amount, while others will charge an item fee plus a percentage rate of the cheque amount. The item fee is a fee charged per cheque and it can vary among cheque cashing services. The percentage will also differ among services, but can vary between two and five percent, or even more. The only restriction in Ontario applies to government-issued cheques: the maximum fee that a cheque cashing service can apply is $2 plus one percent of the face value of the cheque, or $10, whichever is less.
Pay attention to the total amount you would pay. Some places charge a slightly higher percentage fee but don’t charge a per-item fee, where some offer a lower percentage fee but have an item fee. Always do the math and see how much you will end up paying at any prospective cheque cashing location.
4. Is this the same thing as a Payday loan?
Cheque cashing is not the same as a payday loan, because with cheque cashing, the service is only giving you your own money, minus the fee. Payday loans are cash advances on money you will receive on your next pay, usually within two weeks.
5. Why do people use cheque cashing?
There are many different reasons a person might want to use a cheque cashing service. Some people don’t hold an account at a bank where they could cash or deposit the cheque, or if they do have an account, they might have an outstanding balance that would be seized upon deposit of the cheque.
Sometimes the customer wants the money immediately and their bank will place a hold on the cheque before allowing it to be cashed. Another scenario similar to this is if the bank is closed and the money is needed right away.
6. What are the Pros?
The main pros of a cheque cashing service include extended business hours, immediate service, and convenience.
7. What are the Cons?
Critics of the cheque cashing industry say that these business exploit their customers because of the fees charged.
Yet another con is the fact that in some cases, a person leaves a cheque cashing centre with a large amount of money on their person, putting them at risk of being robbed.
8. Should you use cheque cashing?
It all comes down to personal choice and necessity when it comes to cashing cheques. There are both pros and cons of using a cheque cashing service instead of a bank. Convenience, potential danger, accessibility, and cost should all be considerations when you are deciding which service will best suit your needs.