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Cashing Checks and Opening Bank Accounts

How Much Does it Cost to Cash Checks and Buy Money Orders?

Living on a tight budget makes every penny count. If you do not use a bank account to cash checks and pay your bills, chances are you are spending too much for these services. check cashing outlets will cash your government, employer, or personal check but at a high cost (in some states where there are few consumer protections, check cashers are allowed to charge up to 3 times more for these services than the figures used in the following examples).

Your weekly payroll check is $320 .

The check casher charges you 2% of the check’s face value to cash it ($6.40) You cash 50 of these checks each year.

You receive monthly government benefits. The check casher charges you $10 to cash each check .

You also buy money orders to pay your bills, say four a month. You pay $1.25 for each money order .

Added up, you could be paying for checking services each year.

Your Alternatives

You Can Open a Checking Account

A checking account is used to temporarily hold your money to pay monthly expenses and other bills. Checking accounts are the most common way to transfer money from one location to another without carrying cash in your pocket. It is safer than keeping cash. Your checking account cannot be stolen but your cash can. All banks provide checking account services to their customers. Credit unions are a special kind of bank but handle your money in the same way as a bank does.

You need to think about the following in deciding where to open a checking account:

  • Convenience — Where is the bank located and what are its services and hours? Will there be employees who can talk to you in your language?
  • Cost — Does the bank offer any free checking and under what terms? For example, is there a minimum balance (amount) you must keep in the account at all times to get free checking? If not, how much is the monthly fee? Will you be charged per check? What is the fee for “bounced” checks—checks you write that cannot be covered by the money in your account?
  • Check clearing policies — How long will it take for your money to be available to you after you deposit a check? (All banks require that you wait a certain amount of time until the deposited check clears.) Electronic services — Where are the bank ATMs (automated teller machines) and will the bank teach you how to use them? Are they available in your language? Is there a charge?

It is important to understand the bank’s policies and charges, so be sure to speak to a bank employee in your language or bring someone with you who can interpret.

Talk with the bank employees and get a feeling about whether they value your business. If you like what you see, then arrange to open an account. You will need to bring either a social security number, proof of permanent resident status, or you can sign a form called a W-8 (Certificate of Foreign Status) if you are working in the United States and plan to remain for 183 days or less at a time. Some banks will want to get a credit report about you, but others will not.

Most banks offer several different checking accounts. It is important to explain why you need the account, the amount of money you plan to deposit each month, and the approximate number of checks you think you might write to pay bills. The bank should help you decide which account is less expensive for you. A bank account will be less expensive than the check casher. Some rules of the bank such as the minimum balance or the monthly fees, may make it difficult to open an account. Sometimes, the bank may not be located in your neighborhood. If you do not open a bank account, you may still be able to get your checks cashed for free or at a lower cost than at the check cashing store. Here are some suggestions:

To Cash Your Payroll Checks

You can ask your employer if the company will cash your check for you, or you can go to the bank where the employer has its account and cash your check, usually for free. Your employer may be willing to talk to its bank and make sure that you can cash your payroll check for free. Some grocery stores will cash your check if you shop there, or you can go to a bank and open a bank account. You can then deposit your check for free.

To Cash Your Government Checks

Many banks will cash a government check for free.

To Cash Personal Checks

The bank whose name is on the check may cash the check for free.

Be aware that if the check you wish to cash is made out to you, you will have to present some form of identification to cash the check. If the check is made out to someone else, that person must cash the check.


Produced by National Consumer Law Center


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