The Difference Between Check Cashing Services and Payday Loan Stores

The Difference Between Check Cashing Services and Payday Loan Stores

A lot of people assume that there is no difference between check cashing services and pay day loans stores. This is not true.

A place that provides a check cashing service basically operates like this: a customer comes into the business that offers this service and provides a check that he or she wants to cash, whether it is a payroll check, a personal check from someone else, or some other type of check (like an insurance check).

The business agrees to cash the check on the grounds that they usually deduct a fee out of the check for their services, which is typically pretty high. (This is one way these companies make money off of this.) The fee may be a percentage of the check amount, or it may be a flat flee. Let's say a customer wants to cash a check that is $200.00 and the fee is 10% of the check amount.

The customer's check would be cashed and would receive $180.00 in cash, and often has to also sign paperwork stating that if the check was illegal, forged, or bounced, that he or she would then pay back the amount they received plus any extra fees accrued due to this.

Here you will see a big difference between check cashing and payday loans. Payday loan stores operate solely to negotiate payday loans. The following would be an example.

Anna gets paid $600 every two weeks. It is the first week of the month, and Anna just got paid the Friday before. She needs money for an unexpected expense, but doesn't get paid for another two weeks. She doesn't have any credit cards, and she doesn't really have anyone to borrow money from. So she goes to a payday loan store.

There, she'd provide her income information, and if she asked to borrow $200, they would offer to give her that in cash as long as she agrees to come back on her next payday and pay back the $200 plus an interest fee. So she'd write a personal, post dated check out to the company for the amount borrowed plus the interest fee. This way, if she doesn't return on her payday with cash to pay the loan, the store can take the check to her bank and cash it.

As you can see, there are many differences between payday loan stores and check cashing services.