11
Jun

From Checks to Cash The Basics of Check Cashing Services

ff18The idea of using and issuing check has gotten a notch higher. Now, people are no longer required to head to banks to have the check cleared, deposited, or encashed to the individual whose name bears it. A growing industry that offers check cashing services is now gaining ground to help people have a quick access to cash when a check has been issued. The money service industry has gotten larger and this is one of the latest additions to the range of services one can avail.

So, how does this check cashing system work?

Well, it is relatively simple. A person whose name appears on the check can go directly to any of these check-cashing providers. The business will then have to make the necessary verification of the identity. The person may be asked to provide at least two identification cards and/or a bank account. Upon verification, he will be asked to endorse the check and the business will then deposit the amount, less all the deductions and processing fee directly to the bank account. Most of the check cashing business also offer affiliate businesses such as payday loans, bill payments, and money order cashing. The processing fee may vary and some check cashing enterprises may likewise impose a minimum amount.

Advantages of using Check Cashing Services

• This method is advantageous to people who do not have any existing bank accounts. As banks tend to be relatively stricter in handing out cold cash, having to endorse the check to a legitimate business would be more convenient.

• Queues in banks can be extremely time-consuming. Having to spend the entire morning at a bank is not only inconvenient but would require so much effort especially for those who work during banking hours.

• You can have quick access to your money even on a bank holiday. Most check cashing businesses are open seven days a week. They also usually have online portals where your questions can be accommodated any time of the day.

• If there is no check cashing businesses close to your house, simply head to Walmart. They offer check encashing for a minimal fee. A $3.00 fee is deducted to checks, payroll checks, money orders, and tax checks amounting to $1000 or less. For larger amounts, a fee of $6 is deducted. Note that they only encash checks with a maximum amount of $5000. If you live far from Walmart, you may opt to check with major retailers close to your area such as 7-11.

• If you do not have a bank account where the money can be deposited, ask if the check cashing business offers pre-paid card loading system. This is another option. However, this would require activation fee of usually less than $10 per card.

Disadvantages of using Check Cashing Services

• The fees may be quite high. For instance, losing 3% of the check amount of $5000 could instantly mean losing $150 dollars instantly.

• Bounced checks can result to a major legal problem for the person who requested for the check endorsement.

• Not having the right identification card may likewise be a problem. Misspelled names and illegible penmanship on the check can also be questioned by the cashier.

How to put up a check cashing business?

As any type of business, registration and licensing are paramount. There are federal policies as well as local or state policies that have to be considered. As a general policy, any business that entails cashing for a fee fall under the Money Service Business or MSB. The business is required to use approved and checked bookkeeping methods. You are likewise expected to provide your list of agents and any reports that may be associated to money-laundering cases. Having a lawyer to help you with the process is highly recommended. Note that aside from the federal and state laws, the business must comply with the Patriot Act and Bank Secrecy Act as well.

As part of the business establishment process, you also need to identify your own check policy, especially if you intend to branch out someday. The policy fundamentally offers a quick list of which type of checks are you willing to cash out. Examples are money orders, payroll, personal, business, out-of-state or government checks. On top of these, you also need to identify which ID you would require your customers to show – driver’s license, government-issued, passport, or company ID’s.

As money service businesses are also considered high risks, you only need to conceptualize which type of cashing method you would employ. It is encouraged that ‘cold cash’ not be used for any transaction. Debit cards and other PIN-enabled cards are good options, too. Loading ATM or pre-paid cards are advised. In addition, ensuring that your establishment is equipped with 24-hour security system, surveillance cameras, sensor-sensitive doors, and bullet-proof glass would also help.