Have you ever noticed that when you drive through the hood there are certain types of stores that always seem to be everywhere? Corner liquor stores, discount cigarette shops and bail bonds are plentiful in the hood. Two stores (sometimes combined into 1) that you find in our neighborhoods are especially destructive and should be avoided at all costs – payroll advance outlets and check cashing places.
For those unfamiliar, check cashing places are institutions that allow you to cash your personal check or payroll check for a fee. On Fridays when payday has come, or on the 1st of the month when government checks are distributed, the check cashing place will have a line out the door - filled with poor people cashing their checks and going to spend up the money. You may think there is nothing wrong with going to a check cashing place to remit your check, but let’s examine this a little closer.
The fee for cashing a check in one of these places is 3-5%. This means that if you have a $1,500 check you are paying the check cashing place $45 - $75 just to give you your own money! If you are already poor or in a bad financial situation, giving away your money to a check casher for nothing in return is only making the problem worse.
It is no accident that check cashing places litter our neighborhood. Corporations like Western Union and MoneyGram who own these check cashing outlets have very sophisticated software that tells them exactly where to open a store. In layman’s terms, some of the key criteria for locating one of these stores are:
The people who live in the area must be poor and in need of cash quickly
There can’t be any banks around so that the check cashing is the only option
The location has to have repeat customers who live in the area
Looking at the above criteria it is easy to see how check cashing companies can be described as “financial predators”, as they stalk and financially maul the most helpless people in our society. They survey the territory (with their software), find the best hunting grounds, set their trap of “easy money”, and when you come in they eat up their portion of the little money you have. Poor people with no transportation and no banks within walking distance are forced to pay their hard-earned money to the check cashers because they are the “only game in town”.
Many users of check cashing places are just hardworking, average people who live in the neighborhood and need their money to feed their families. The rest of the users consist of the elderly, infirmed, financially strapped, or those on some type of government assistant. Both groups of people are the very ones who can least afford to give their money away. The check casher does not care about personal situation and takes advantage of these people to line their pockets. This is their business model and this is how they make big corporate profits.
You will not find check cashing places in rich neighborhoods because they won’t make any money. There are no clients for check cashing companies in rich neighborhoods. Why? Because rich people are not desperate and they have the one thing that too many poor people do not have and can easily get – a bank account.
According to an FDIC study in December 2009, 22% of African Americans do not have a checking account and households with income under $30,000 account for at least 71 percent of unbanked households. Combine these 2 stats together and you basically can conclude that too many poor black people do not have bank accounts.
source: Economic Inclusion.gov
Household Banking Status categories:
Unbanked:Households that answered "no" to the question, "Do you or does anyone in your household currently have a checking or savings account?"
Underbanked:Households that have a checking or savings account but rely on alternative financial services. Specifically, underbanked households have used non-bank money orders, non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years.
There is no reason not to have a checking account and with one you have several advantages:
You can cash your check for free
Instead of taking all the money in cash you take what you need at the moment and deposit (save) the rest
You can write checks to pay your bills instead of using cash or buying expensive money orders
If you have an Internet connection you can pay your bills online which will save you even more time and money
We cannot blame the government or any group for our people not having checking accounts. Any bank will let basically ANYONE open a checking account. It is an easy thing to do and we need to do it – period. The first step to financial freedom is being in control of your own money, and having your own bank account is the first step toward taking control. After all, who do you want to have the money – you or Western Union?
22% of African Americans do not have banking accounts
32% of all black households reported using non-bank check cashing, money orders or payday advance, rent-to-own or pawn shops during the year 2009.
The check cashing place looks like a little mom and pop store but it is owned by a major corporation.
The money spent cashing checks at the CCs adds up quick. Cashing checks twice a month (24 times) at $50 a pop equals $1200 a year – wasted.
You can open a checking account with as little as $20
ANYONE can open a checking account and it takes less than a half hour
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