How Does Check Cashing Work?

check cashing service

You can cash a check at your bank. But what if you don’t have a bank account or you need to cash a check while traveling? According to a 2022 Federal Deposit Insurance Corp. (FDIC) report, approximately 5.9 million Americans don’t have a bank account. If you’re part of the millions of Americans without a bank account, you’re probably exploring your options and researching how check cashing works. Check-cashing services are one solution. 

Check-cashing companies are entities that exchange checks for cash outside of a traditional bank-customer relationship. These companies offer a safe way for you to get the money that’s owed to you without a bank. But there are some drawbacks, especially the fees they charge. Read on to learn how these check-cashing services work and find some less expensive alternatives. Before using a check-cashing company, consider your other options. 

Why would you use a check-cashing service? 

Despite the availability of fee-free check deposits with some banking services, check-cashing businesses continue to thrive. Reasons you may be tempted to opt for check cashing include:

  • You don’t have a bank account
  • You live too far from a bank
  • You need cash immediately
  • You’re traveling and there isn’t a branch of your bank nearby

While these are all valid issues, it shouldn’t discourage you from seeking alternatives to check-cashing services. Whatever obstacles you face, there is a banking service that can meet your needs and help you avoid all the disadvantages that come with check-cashing businesses.

Reasons to avoid check-cashing businesses

How do check-cashing places work? They offer a simple solution to cash a check. In exchange, they take a fee. You’ll often pay a premium for the convenience. Check-cashing services aren’t banks. They are businesses with names like Check City, Amscot, and ACE Cash Express.  

Usually, these businesses will verify your identity, cash the check, and give you the money minus a fee. The advantage is that it is instant. While there are upsides to check-cashing services, the downsides often outweigh them. Here are the primary reasons you should find another way to cash your check:


Check-cashing fees are the most obvious downside to using these services. The fees are high, usually between 2% and 9.9% of the check’s value. That can mean paying almost $500 on a $5,000 check. 

Increasingly, there are free check-cashing companies or online banking options to cash a check. These days, many financial services and apps don’t charge anything to cash a check. These free or low-cost services offer simple ways to cash checks from anywhere. Likewise, you can almost always cash a check for free at your bank or credit union. 

You often won’t find out exactly how much you’ll pay until you’re at the check-cashing place. The fees can include a flat rate plus a percentage of the check’s value. Retail and grocery stores may charge lower fees to cash a check, but you can avoid fees altogether by getting a bank account and cashing the check at your bank.


A less obvious drawback to check-cashing companies is the security risk associated with carrying the cash. With cash on hand, you become an easy target for thieves and other criminals who want a quick payday. If your freshly cashed paycheck gets stolen, you lose all the money you earned throughout the workweek, and you likely won’t have any way to recover the funds. Even with a police report, it’s unlikely you’ll get the funds back.
Even if the funds aren’t stolen, the worry of carrying all your funds home and the possibility of losing them can add unnecessary stress to your day. In addition to your weekly funds, a bank account can give you a safe place to build up an emergency fund and savings. 

Paying bills is harder

Cash is, in many ways, fading out. Online payment systems like Apple Pay or Google Pay are starting to replace even standard credit cards. While it may seem easier to stick with check-cashing services than using a banking account, that isn’t the case. 

Some companies no longer accept cash. Likewise, paying your rent or utility bills can be more difficult in cash, and you may need to travel to the location. If you deposit a check into a bank account, you should be able to pay most bills with a linked debit card. 

Saves you a trip

The convenience of banking goes beyond bill payment. Your time is valuable, and you shouldn’t have to waste it driving or walking to the nearest store that will cash your check. You also don’t want to waste time traveling to locations to make standard payments. If you can save a couple of hours a week, wouldn’t you rather enjoy extra downtime or family time?

Deposit times have sped up

A common reason to opt for check-cashing services is to speed up the deposit process. But what many people may not realize is that banking services now offer expedited deposits. Instant cash checking is now an option with more traditional financial institutions. 

There are also cash-checking apps from major companies like Venmo, PayPal Holdings Inc., and Ingo Money that let you instantly add funds to your bank account. Some online banking services will even credit your account while the check is being processed. 

How to get money right away without fees

How does check cashing work? It makes it easier to cash a check wherever you are in the world. Years ago, check-cashing services were the only option available to people without bank accounts or for those who couldn’t wait for a check to clear. 

Now there are alternative financial institutions that make banking services easier. Between these institutions and online check-cashing apps, you shouldn’t have to pay 2% to 10% to get your weekly paycheck. It’s reasonable to expect that you can get your cash faster without holds or hassles and without the fees that come along with check-cashing services.


Do check-cashing companies offer free services?

Check-cashing companies charge fees for their services. The fees can be as low as 2% of the check amount or as high as 10% plus a flat rate. Often, you won’t know unless you arrive at the check-cashing service point.

What is a check-cashing service?

A check-cashing service is a business that cashes checks quickly. These services are used most often by people without bank accounts or who need a check cashed instantly. 

How much do check-cashing services charge?

The fee for check cashing can range from $1 to $100 or more, depending on the service. Usually, it is a percentage of the check cashed. A $5,000 check cashed at a fee of 2% would cost $100, while the same check cashed with a fee of 9% would cost $450.

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