Okay, so here’s a question that will often get asked by people that are unfamiliar with the check cashing industry.
They want to know how exactly does a check cashing business make money.
It’s actually very easy to understand. Check cashing businesses are extremely straightforward.
Here’s how it works. When you take a check into a check cashing business to cash it, they will give you the money for the check minus a small fee.
Usually that fee is around 3%, but it can be higher in some cases.
Check cashing businesses make money based on those fees. While these may not seem like much they do add up over time.
In addition to the small fees, check cashing businesses will also offer additional services.
It’s the cumulative effect of all the services check cashing businesses offer that generates the revenue that they depend on.
That having been said, the check cashing business is in some decline since the advent of things like direct deposit.
What Are Some Of The Other Services That Check Cashing Businesses Offer
Check cashing business will offer a variety of different services depending on the location.
For instance, it is pretty common for these business to offer services such as cash advance or even payday loans.
These are more commonly known as “Consumer Loans” now, but they are basically just payday loans in disguise.
In other cases, check cashing business will also offer services such as bill payment.
That allows customers to pay their utility bills at the check cashing store for a small fee.
In addition to bill payment, there are also other services such as Western Union. A check cashing business will collect a small fee when they send money through Western Union.
Normally, it’s just a few dollars but like everything in these check cashing stores – it’s not about just one big fee. It’s a cumulative effect of all of the individual transactions that add up.
The Nerd’s Opinion
Check cashing businesses don’t make an incredible amount of money over all, certainly not when compared to something like a pawn shop.
That’s why often times the check cashing services are attached to a pawn business and the stand alone check cashing stores are slowly starting to disappear.
Overall, things like direct deposit have really hurt the check cashing industry overall as fewer people receive actual paychecks in favor of just having the money sent right into a bank account.
Ultimately, check cashing businesses will probably be around for years to come but largely as a part of another business.