To start with, what does cashing a check mean?
Cashing a check means you’ll get cash in hand. Your payment is collected in full, and you are free to use it right away. It’s not always simple (or cost-free), though. When you deposit a check, the bank or credit union will add it to your account.
Please continue reading as I provide more information about what it means to cash a check.
Table of Contents
What Does Cashing A Check Mean?
receiving cash in exchange for depositing a check at a bank or other financial institution Let’s say Joe sends Bob a $10 check as an illustration. Bob could visit his bank, present the check, and receive $10 in cash as opposed to depositing the check. The bank then sends the check to Joe’s bank and collects $10 from Joe’s account as payment for the cash it gave Bob.
Check Types Matters
Different things depend on the kind of check you’re attempting to cash. Banks only have a requirement to make the first $200 or so available to you within one business day for a personal or commercial check.1 Banks may treat government-issued checks differently—you’ll often have access to 100% of the cash with one business day after the banking day.2
Other checks, such as cashier’s checks, payroll checks from nearby employers, and payments from insurance companies might also be eligible, depending on the policies of your bank.
You might have to deposit a check if you can’t cash it for the full amount. Which type of deposit you make will determine how quickly you can access the money in this situation. If you need the money right away, handing cash to bank employees in person is the best option. Although using your mobile device or an ATM may result in longer bank hold times, you can also deposit money there.
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How To Cash A Check?
Try To VisitThe Check-writer’s Bank
Take your check to the bank of the person who wrote it for the fastest and safest way to get cash. You can withdraw the money from the check writer’s account and have it in your hands right away at that bank or credit union because it is where the check writer’s money is kept. If you visit another bank, you can’t be sure the check is valid and that the money is in the account of the person who wrote it.
The check’s front bears the name or logo of the bank. You are free to visit any branch of the same bank; you don’t have to go to the one the check writer does. Make sure the identification you bring matches the name on the check.
The check may need to be cashed for a small fee of a few dollars if you don’t have an account there. Even worse, the bank might decline to cash the check for you because you don’t have an account there. Additionally, based on the size of the check, you might not be able to cash it since some banks have a cap on how much cash they can issue. It will help if you go to one of the bank’s larger branches, which usually have more funds available.
Cash It At Your Own Bank
Check cashing may be a good choice at your own bank or credit union if the following conditions are met:
- The check writer doesn’t have enough money to cover the check, so you don’t have to worry about it bouncing or being returned.
- Either the check is a government check or it was written for less than $200.
- You don’t want to spend money.
Since you are a customer, your bank should cash the check without charging you. The check may take several days to clear, so you might not immediately know if it will bounce. In most cases, banks allow you to take up to $200 immediately or within one business day, assuming everything seems legitimate.1 However, you’ll have to repay that money—plus a fee (which could be up to $35)—if it turns out that the check has bounced.56
Cash A Check At An Atm
You can cash a check at an ATM, though it’s a little less simple than taking it to a bank. However, not all ATMs will give you this choice; some will only let you deposit the check, and some won’t even let you deposit checks.
Simply bring your check, your bank card, and a pen (to endorse the check) to the ATM if your machine supports this option, and then follow the on-screen instructions. Before the ATM will dispense your cash, you might need to have the specified amount of funds available in your account.
Retailers & Check-cashing Stores
You can try to get cash at a retailer if your bank is closed, won’t cash the check, won’t give you more than $200 in cash, or if you don’t have a bank account. Although you might be able to cash small personal checks as well, you’ll have the most success with a government-issued or payroll check.
Checks are frequently cashed at big-box retailers, supermarkets, and convenience stores for a nominal fee, typically a few dollars. Kmart is unique in that it allows you to cash personal checks up to $500 and charges no fee at all in some states while only charging $1 in others. Most places will only cash personal checks up to $50 or $100. The majority of merchants only accept money orders, payroll checks, and government checks.
However, if you have a small personal check (less than $25), you can always ask a staff member at the customer service desk if they can make an exception, especially if you’re a frequent customer. But be prepared to be declined.
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A Check Cashing Service: What Is It?
A check cashing service does exactly what it says on the tin: it enables people who don’t use banks to cash their checks.
Always keep in mind that these services are not banks. Instead, they are “storefronts” or companies like Amscot, ACE Cash Express, and Check City that provide a number of straightforward services for a fee, including check cashing, money orders, payday loans, and bill payments.
Major retailers like Walmart, Kmart, Publix, Kroger, and Food Lion are examples of this group.
They are common and offer assistance to those who require a means of cashing a paycheck or other check, such as an IRS refund or Social Security check.
According to the organization that represents this sector, the Financial Service Centers of America (FISCA), there are more than 13,000 check cashing “stores” in the country. Each year, they serve over 30 million clients and cash more than $58 billion in checks.
They deliver financial services worth an estimated $106 billion annually in total.
How Does Check Cashing Work?
The system is simple to use. To convert a check into cash, all you need to do is bring it, your ID card, and a check cashing location. After signing the check’s back. The amount of the check, less the fee, will be yours to keep. Some retailers might ask you to complete a form.
The ability to immediately pocket the money is one of the key distinctions between using a bank and a check cashing service.
Checks that are deposited into accounts may be subject to a three-day hold at some banks. As a result, if you deposit a check on Monday, you might not have access to the money until Thursday of that same week. If you need the money right away, the check cashing service will convert the check into cash so you can leave the office with it.
Who may be in need of this type of service?
- Unbanked and underbanked people: Some individuals dislike using banks. Banks won’t open accounts for others because of a troubled past involving overdrafts or failing to pay fees. A check cashing service is not only a nice feature for these people; it is also a necessity.
- Individuals in immediate financial need 13% of the country’s bank account holders still use check cashing services, according to the Federal Reserve. According to FISCO, 60% of customers have a bank or credit union account. These people are drawn to check cashing services due to how convenient it is to get cash right away. If, for instance, the mortgage or electric bill is due, some people might not be able to wait the few days it takes for a check to clear at the bank.
- Individuals who live in areas without access to conventional financial services It’s possible that there aren’t many banks in poor or rural areas. Online banking is available, but it’s possible that poor or remote areas lack access to computers and the internet. Additionally, many check-cashing businesses have opened up in underbanked or unbanked communities to accommodate people who require the ability to cash a check at odd hours.
Pros And Cons Of Check Cashing Services
Life is a give-and-take situation. The same is true of check cashing services. Use of a check cashing service is determined by the situation and one’s financial situation. While there are costs involved, having quicker access to your money can be crucial.
This strategy has advantages and disadvantages. It is prudent to comprehend both.
Pros
One advantage of a check cashing service is that:
- Financial services are available to those who are under- and unbanked and may otherwise be without recourse.
- access to money right away without having to wait for checks to clear.
- There may be more opportunities to cash checks if the service is open later in the day.
- There’s a chance the service will have locations without physical banks as well.
Cons
The fees that check cashing services charge are foremost among the drawbacks because they keep low-income users in a difficult cycle because they have to use some of the meager income they have to visit a service just to cash a check. Among the negatives:
- Fees: Fees for cash checking services can be as low as $1 in some locations and as high as 2% of the check amount in others. The ability to make ends meet or have extra money to spend is diminished by these fees. Always be aware of the costs and fees before using a check cashing service.
- Upselling: There are numerous “services” that will try to sell their clients expensive payday loans. Given their predatory nature, payday loans should cause a red flag to go up for all consumers. The process of borrowing money is risky and expensive. Don’t let them talk you into taking out a payday loan, even if you let them cash your check.
- Risk: While cashing a check may seem like a good idea, there is risk involved when leaving a store with $1,000 in your pocket, particularly if shady characters know that the people leaving the store will be carrying a sizable sum of money.
- Federal protection is absent: Your money is not protected by the FDIC in the same way that it is at a bank when you use a check cashing service. Every new customer who opens an account with a bank is covered for up to $250,000 per bank for each account ownership category. Consequently, the government will cover your loss up to $250,000 in the event that the bank fails. Check cashing businesses are one-stop shops without ongoing protection.
- Getting trapped: The simplicity of check cashing can result in a challenging cycle. Take your money, cash the check, and cover the fee. Although it might seem convenient, the cycle won’t aid those who are having trouble making ends meet. The end result is that a person doesn’t visit a bank and doesn’t establish a connection with the neighborhood bank or credit union. A bank or credit union is always the best option. Sometimes things that appear simple simply have too much of a price.
Check cashing shops have advantages, but there are also drawbacks that could be very serious.
Final Thoughts
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