Yes – Check-Cashing Stores Do Provide a Valuable Service

An opinion of check-cashing stores is that they exist to rip off customers via expensive financial services that are better handled by banks. But is that opinion true? According to an Ivy League professor with more than 20 years of research to her name, it is not.

Business Insider published a great article in February 2017 detailing the research of University of Pennsylvania professor Lisa Servon. She and a colleague spent 20 years researching how people living in low income communities deal with their personal finances. That research led her to believe that the attitude about check-cashing stores wasn’t quite right.

So what did she do? Servon went and got a job as a cashier at a Bronx check-cashing store. She followed that up with another job in Oakland. Both jobs were applied for with full knowledge of her research. Her up-front and honest approach paid off. She discovered that check-cashing stores do provide a valuable service. She also discovered three legitimate reasons people use check-cashing stores instead of banks.

1. Lower Total Costs

At the top of the list of reasons to use a check-cashing store was a lower total cost for financial services. This runs contrary to popular thinking. Servon discovered that customers were not sitting around asking themselves, “where can I cash a check near me” without carefully considering how much it would cost them.

Yes, check-cashing stores do charge a certain percentage of the total amount of the check as a service fee, but check cashing saves some customers money in the long run. For example, bouncing a check can cost between $35 and $50 at a bank. Customers who do not have checking accounts cannot bounce checks.

Servon spoke to one customer who was in the construction business. He said that he needs money as soon as he’s paid in order to make payroll and buy supplies for the next job. He uses a check-cashing service because their fee is less than the cost of losing laborers and contracts while waiting 2 to 3 days for a check to clear.

2. Transparency

The second reason has to do with transparency. When a customer goes to cash a check or apply for a cash advance at a local check-cashing store, the store is up front about all its fees and charges. You do not always see the same level of transparency from banks.

Customers frequently mentioned to Servon the problem of not fully understanding all the fees and charges banks and credit unions commonly charge. Getting information from tellers is like pulling teeth, where check-cashing clerks freely answer questions right at the counter.

3. Customer Service

Perhaps the most shocking reason people choose to patronize check-cashing stores is service. For starters, all the services a particular store offers are presented similar to a menu at a fast food restaurant. Customers know exactly what they can and cannot get the minute they walk in the door. Easy, right?

Next, customers willing to speak to Servon told her that the cashiers they dealt with were friendlier and more customer-oriented than bank representatives. As a retail operation, that makes sense. Check-cashing stores have to stress customer service in order to compete.

Servon concluded that people who regularly use check-cashing stores and other alternative financial services are actually very good at managing their money. They know where every penny is being spent; they know where to find the best deals; they know how to live on the cheap. She concluded that check-cashing stores do provide a valuable service that has a legitimate place at the financial services table.