The Good Side of Check Cashing and Payday Loans

I’ve got to be honest with you. While the righteous scream out about check cashing and payday loan stores, I’m not sure I understand all the fuss. Sure I get the fact about fees and I will admit that I’ve seem some sleazy payday loan stores and outfits. But you know what, I’ve seen my fair share of sleazy banks and credit card companies as well.

Being a big name bank does not make it less egregious to charge someone $35 for overdrawing their account by $1. Don’t even get me started about the unit driven treatment of individual people by large Main Street banks. $3 to use a teller, please!

Banks do a good job of doing what banks do but they don’t offer all a user friendly or customer friendly service that people want and need. Check cashing stores like Mix check-cashing in Los Angles, do serve a particular market segment.

Nix and other similar check cashing businesses offer their customers something that most banks don’t personal attention, clear fees and choice.

Rather than be sneaky about changing interest rates, terms and magical fees; customers that use places like Nix Check Cashing know exactly how much services are going to cost. They are good and loyal customers that come back time and time again because they are treated well and the check cashing store does not force their financial products on the customer like a bank does.

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Sure, a payday loan can be expensive, but so can overdrawing your bank account and going into overdraft, paying to get your utilities reconnected for a late payment or paying a steep fee and ruining your credit by making a credit card payment one hour late.

He told Lagomarsino why. A bounced check, a fee to reconnect a utility, a late-payment fee on your credit card, or an underground loan, any of those things can cost more than a payday loan. And then there are overdraft charges. “Banks, credit unions, we’ve been doing payday loans, we just call it something different,” Lagomarsino says. “When it starts to get used like a payday loan, it’s worse.”

I think we need to get off our moral horse and look at check cashing stores in a different way. These much maligned outfits are offering a service that meets the customers needs and charges a premium for risk and convenience.

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If I go to a cheap neighborhood restaurant and order a steak, does that mean that I’m getting ripped off when I pay ten times the amount for a steak at an upscale restaurant? Or is that my choice?

It seems to me that the issue isn’t that payday loan stores and check cashing outfits exist. The real issue is that these companies fill a need that is not being met or unable to be met by any other business.

It might be that Nix Check Cashing might be making changes in that old paradigm. Kinecta Federal Credit Union is purchasing the Nix Check Cashing business and will continue the services it offers and introduce it’s credit union services to the check cashing customers.

Then Kinecta Federal Credit Union called with its offer. “We were trying to understand why check cashers have been successful in underserved areas where banks haven’t,” Kinecta’s president and C.E.O., Simone Lagomarsino, told me. What they concluded was that most banks simply didn’t know low-income neighborhoods or understand them. “We go in with this cookie-cutter approach: This is our branch, this is our way we do business,” she says.

And that is an excellent point, why is it that banks chastise payday loan outfits on one hand but then don’t serve or offer services to the market segment that the payday loan stores serve? You also have to ask yourself how much difference is there between a payday loan outfit that charges $22.50 for someone to borrow $150 for two weeks and a gaggle of banks that flood a nearly anonymous person with five empty credit cards with 30% penalty rates.

If you would like to read more about Nix Check Cashing and the check cashing business in Los Angles, I strongly suggest that you read the recent New York Times Magazine article that I quoted from, “Check Cashers, Redeemed.”

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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