Check-cashing stores have for years been easy targets for advocates of economic justice, who have argued that the industry provides an expensive service and takes advantage of people who can ill afford it. But now some city officials and nonprofits are recognizing that in lower-income neighborhoods, many of which have a meager banking presence, check cashers fill a vital need by giving people access to their money.
More than 825,000 adults in New York City don't have a bank account, according to the city's Department of Consumer Affairs. People rely on the state's nearly 700 check cashers for more than just money: They use the check outlets to pay utility and phone bills, buy subway passes and lottery tickets and refill prepaid debit cards.
Those services come at a high cost. In 2008, check cashers in two neighborhoods noted for their lack of mainstream banking services—Jamaica, Queens, and Melrose in the Bronx—took in $19 million in fees, according to a study done by the city's Office of Financial Empowerment, a division of Consumer Affairs.
"We recognize that the traditional banking sector is uninterested in serving the low-income community," says Peter Bray, the executive director of the New York City Financial Network Action Consortium. The nonprofit seeks greater access to banking services and credit for small businesses and lower-income people.
When the consortium first formed, it didn't have a high opinion of check cashers. Over time, that position has shifted. The group recognizes that these stores often are poor people's only way to change a check to cash. And New York regulates the industry, providing oversight that many states don't have.
The consortium continues to develop local credit unions that help lower-income people improve their financial security. But credit unions aren't likely to drive check cashers out of business. "These are people who need our help," says Howard Stein, chairman of RiteCheck, which operates 12 stores in Harlem and the Bronx. Stein, 89, has been in the business since he returned from serving in World War II.
Today, check cashers provide convenience and clarity, says Ira Krell, the chief financial officer for David's Financial Corp., which owns 24 check cashers in the city. "The transparency in pricing is a huge, huge determining factor," says Krell. He explained that lower-income people often don't trust banks because fees aren't always apparent. When a person uses a check casher, he or she pays 1.83 percent upfront. There's no question about hidden costs.
Check cashers offer other benefits. Most are open seven days a week, often for longer hours than banks—important for a person working two jobs. And some lower-income people don't feel welcome at a mainstream bank, according to Peter Bray.
While Bray and the consortium acknowledge that check cashers play a vital role, they also know that profit, not service, is the motive. "We shouldn't confuse [their work] with them doing anything to enhance the financial security" of lower-income people.
If the unbanked can master the banking system, they'll see a difference in their wallets. Estimates are that a family of four with income equal to the official poverty line—$20,444—pay almost $400 in fees if they use check cashers rather than banks.
