Via Insty, there's this here article about a professor of city and regional planning who went out and investigated, in person, the reasons people use check-cashing services despite the existence of banks.
And, whaddya know? The Conventional Wisdom (as disseminated by those in the upper echelons of society), holding that check-cashing services are a lousy deal compared to banks, turns out to be wrong in every important respect.
Me, I use a bank... but I'm a high-value customer that the bank goes (somewhat) out of its way to retain. That I'm considered high-value reflects poorly on the state of the middle class these days, but that's a subject for another rant. Anyway!
These small fees add up, but they often paled in comparison to the unexpected charges, maintenance fees, and overdraft fees customers had experienced at banks.
Ayup. If you're not maintaining a healthy buffer in your checking account, this stuff can really add up. And if you have a bunch of small charges in the queue, and an unexpected large charge drains your account, you can suddenly find yourself looking at a large overdraft charge for each of the fiddly little charges that follow. Yikes!
If Carlos deposited his check in a bank, it would take a few days to clear — too late to deliver cash on payday. Or maybe the check was a deposit for a job he had just been contracted to do, and he needed supplies to get started.
Again, yes. Checks to my account clear pretty fast, generally. To those who aren't preferred customers? Those can take a long time. This would make sense if the accounts were being kept in big paper ledgers, and the physical checks had to be mailed around. But with everything electronic? Why does it take more than a few seconds to process a routine transaction?
(Sometimes transactions can be expedited; I've occasionally had a teller keep me chatting at the counter while a large deposit went through, despite my not having expressed any urgency about having the cash right away.)
Customers "felt like they knew exactly what they were paying when they went to the check casher. And if you go into a check casher, you will see there are signs that span the teller window that list every product that's for sale and how much it costs," Servon said. "The transparency is really critical."
On the contrary, customers couldn't predict when banks would charge them a fee or what that amount would be — a deal-breaker when you're operating on a tight budget.
Spot on, once again. In the realm of the (semi-)prosperous, if you're going to do anything that runs up charges, it's a big enough deal that you discuss it ahead of time with a banker and work out the details. If you're not so prosperous and get into the routine service charges, it's hard (sometimes impossible) to know what the charges will be - especially since some of them are timing-dependent.
"Banks want one customer with a million dollars. Check cashers like us want a million customers with one dollar," Coleman, the RiteCheck president, said in Servon's book.
Ding! I don't have anything like a million dollars, but it's still enough to get the bank's attention.
For those with not so much? Banks want to avoid them, and they might want to avoid banks.
Additional: There are other reasons to avoid the banking system, for some people in some circumstances. For one thing, there's no privacy when using banks; the bank is tracking all your financial activities, and reporting some or all of them to Big Brother, as well as sharing with credit-rating agencies and such. Then, too, if you're in a business that some political faction dislikes, even if it's entirely legal, you may find your bank access cut off and your funds unavailable pursuant to some law intended to clamp down on illegal businesses but applied much more broadly.