Check Cashing
For someone who has no bank account, check cashing is a seemingly convenient way to make your payroll checks immediately available. Many convenience stores and pawn shops offer check cashing services for a fee, but over time these fees will add up and end up leaving a large dent in your wallet! While some people offer check cashing services for a one time fee, Others will offer Deferred Deposit Loans. Many of these lenders prey on those in financial need, offering loans at rates that are nearly impossible to fulfill. This is also called predatory lending. Predatory lending under the disguise of Check cashing should be avoided at all costs.Noone likes seeing their money wasted by frivolous charges. Repeated check cashing is exactly that. Flat-Rate Check cashing services usually charge anywhere from 5% to 30% for their services. They also sneak in service fees on top of the interest rate they charge. One way to minimize the impact of these charges is to demand a full description of all fees. Many services will try to sweep small charges under the rug in an attempt to nickel and dime a little bit more money out of you. Don't let them! Insist on a full receipt for all charges, or refuse to pay them. Before you use a check cashing service, learn the rates and do the math. Don't let them try to charge you more than the rate you agreed to.
Always watch out for predatory lenders. These lenders specifically target those with poor credit and those who are unable to open their own bank accounts. Most of these lenders have smooth talking salesmen who will offer you attractive, affordable sounding loans. These loans may sound good at first, but when you look at the big picture, the terms of the loan may be almost impossible to fulfill. Make sure to read all of the small print! Predatory lenders make a living by trapping people into loans which they do not understand. Those who find themselves entangled in these loans will often end up paying far more in interest than they borrowed in the first place!
If you are forced to take a loan such as this, do everything you can to pay it off quickly! Paying the loans off quickly will minimize the financial damage caused by unreasonable interest rates. Do whatever is necessary to make the payments as quickly as possible, even if it means breaking into your savings accounts or selling property. The interest rate that your savings account is generating is nowhere near the money you are losing from a predatory check cashing loan. If you have no choice but to get a one of these loans, make sure that you only borrow as much as you are sure that you can pay back quickly. If you are in over your head, look into credit counseling. These services are free of charge, and are legitimately there to help you get out of debt. Since it is better for both the banks and the consumers for debts to be paid off rather than defaulted, many credit counseling services are sponsored by banks and other financial institutions. The U.S. Department of Justice keeps a list of all accredited cedit counseling organizations at http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.
The best way to avoid the fees of check cashing is to get a checking account and deposit the checks yourself. Most banks provide completely free service, especially if you arrange for your checks to be automatically deposited via direct deposit. Direct deposit provides the fastest way to get your paychecks to your account, since the funds will usually be available at the beginning of the day you would normally receive your check. The small fees usually associated with owning a checking account are usually nowhere near the fees you would accrue by regularly using a check cashing service or predatory lender. If you are having trouble getting a bank to open a checking account for you, your local credit counseling agencies can probably help. They offer programs which will help you settle your outstanding debts and consolidate all of your payments into a manageable payment plan. They will even help you negotiate with your lenders to lower your monthly payments so that you can get back on track.
While there are many things to watch out for, check cashing does not have to turn into a financial nightmare. Make sure you understand exactly what you are getting and read the small print. Never rush through the paperwork! As long as you deal with reputable lenders and read and understand all of the terms and conditions you will usually not loose too much money in the process.
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