Check Cashing Services: The Lure of Quick, Easy Money? - Check Cashing

You have a job and an active checking account, but you find that money's short this week. There's a payday advance store down the street.  Easy money, right?  For a couple of weeks, until you have to pay it back, with interest.  Isn't it better than writing a check to yourself and telling yourself that it you will put it in your checking account before it goes through or pawning the family silver? Is it just desperation that draws the consumer to payday advance stores? Not according to The Credit Research Center at Georgetown University.  According to the April 2001 study, "Payday Advance Credit in America: An Analysis of Customer Demand," by Gregory Elliehausen and Edward C. Lawrence, the majority utilizing payday advance loans are earning at least $25,000 annually, with more than half under 45 years old, most educated with at least a high school degree and over half with post-secondary education.

Payday Loans, How They Work and the Price You'll Pay

Check cashing services include "payday" loans, banks, grocery stores and pawn shops.  Times are tough and consumer demand keeps check cashing services such as payday loans in business, right? Let's take a brief look at the industry.

What exactly are payday loans and how do they work?  Payday loans are exactly that--loans until your next payday.  A consumer cannot obtain a payday loan without bringing in proof of an active checking account and proof of employment, usually your last three pay stubs.  The cashier checks your information and confirms it before you can sign for a loan.  Many are tempted to ask for the maximum available based on your income from your pay stubs.  But in one to two weeks, depending on your rate of pay, you will have to pay that loan back unless you live in one of the few states allowing you to "rollover" the loan for a fee.  Predatory lending investigations have issue with the annual percentage rate (APR), which on first glance can be classified as usury--an unlawfully exorbitant rate. For instance, if you want to borrow $100 and the fee for the payday loan is $15, the APR is a whopping 390 percent.  But, remember that the APR is annual, not what you will pay if you pay in two weeks when your loan comes due.

Sometimes You Just Need To Cash a Check

Other check cashing venues you might want to check out are your own bank, your local grocer, pawn shops, and anywhere a sign is posted "Cash Your Checks Here."  Not all check cashing sites or locations are payday loan type, some will simply cash your check for you.  Just use common sense, check out what will happen to your check once you cash it or obtain a payday loan and have it held for you, and don't utilize such resources out of financial desperation.