This post compares state laws governing the cost of cashing a check. We factor for type of check, be it payroll, government-issued, or personal.
We believe that our accounts can help people reduce their cost of making transactions. We offer accounts with monthly maintenance fees priced well below the fees charged by the prepaid debit cards sold in retail stores. Some of our cards have no monthly fees, no per-swipe fees, and no fees to access one of the card’s surcharge-free ATMs.
However, savings on those benefits, while very impactful for a person on a tight budget, are only a fraction of the overall opportunity. We will never offer a card with an overdraft fee. Consumers who use traditional checking accounts incur an average of four overdraft fees per year. A minority pay more than $300 in overdraft fees annually. As a result, WiseWage helps the “banked” consumer. However, unbanked individuals can also benefit. For those who do not have an account already, signing up for a WiseWage card ends the need of the consumer to use a check cashing service.
As the name implies, check cashing stores earn money by charging consumers to cash checks. Sometimes they have other lines of business, of course, and frequently those other services include high-cost consumer finance installment or payday loans. Those products are expensive, but so is cashing a check. In some states, it would not be out-of-the-ordinary for a minimum-wage worker to spend five hundred dollars per year to cash paychecks.
The living wage movement should pay attention to check cashing laws, as they are a shadow tax on unbanked workers.
Personal checks usually cost more than government-issued checks or payroll checks, as they have a higher likelihood of bouncing.
States set ceilings on how much a store can charge, with accommodation given according to the type of check. Sometimes the top rate is configured as a percentage of the face amount of the check. In other cases, a state may establish a top-level fee. For example, in the state of Rhode Island, a company cannot charge more than seven percent of the face value of a personal check or $5.
States with the highest rates:
Florida: Personal checks – 10 percent or $5, whichever is greater. Payroll check – 5 percent or $5, whichever is greater. Money orders – 10 percent or $5, whichever is greater.
States with a similar schedule: Maine (6 percent on payroll checks without proper documentation), Indiana, Hawaii, Mississippi, Rhode Island, Tennessee, Vermont, and Georgia.
California: Personal checks – 12 percent, but 3 percent for payroll checks cashed with valid identification.
States with the lowest rates:
West Virginia – 1 percent of the face value or $1, whichever is higher. The rate is the same for government checks, payroll checks, money orders, and personal checks.
New Jersey: 2.21 percent or $1, whichever is greater, for payroll and personal checks. For state-issued public assistance disbursements, 1 percent or $0.90, whichever is higher. For social security checks, the maximum is 1.5 percent or $0.90, whichever is greater.
Connecticut: 2 percent or $1, whichever is greater, for personal and payroll checks. The rate is only 1 percent for state-issued checks drawn to distribute public assistance.
States without caps: Massachusetts, Minnesota, Kentucky, Wisconsin, Virginia, Utah, and Arizona.