Cashing Checks
The Costly Way

Most check-cashing stores offer two services:

  1. Check cashing
  2. Payday loans

Both of these services can take a chunk out of your paycheck.

Check cashing. The check-cashing store charges a fee for cashing your check. Often, it is as much as 3 percent or 4 percent per every $100 of our check. That may sound small, but the amount adds up quickly. For example, if you have a job that pays you $800 a month after taxes, the check cashing store could charge you $24 to $32. In a year, that means you've lost $288 to $384. That money could go a long way toward books and other college expenses.

Payday loans. This type of loan can be extremely costly. With a payday loan, you write a check for the amount you want, say $200. The store loans you the $200 and agrees not to cash the check until the next payday. What happens if you don't have the $200—plus the store's fee—by the next payday? You can carry over the loan, but you will pay a large fee. The interest rate on a payday loan could be around 500 percent or more. If you If you refinance you $200 loan four times, you'll be paying another $200 in interest.

You worked hard for your money and you need every penny. There are cheaper ways to access your cash.