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Cheque cashing services can let you cash in a cheque instantly but charge significant fees for the service. You will usually need to pay a transaction fee plus a percentage of the amount you're cashing in. In some instances, taking out a payday loan could mean you pay less in fees than a cheque cashing service, explained in this section.
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What is cheque cashing?
Cheques usually take three business days to clear with banks, but cheque cashing services can clear a cheque within minutes. This service is usually provided in exchange for a fee, as the lender providing the service is taking a risk by forwarding the money before the cheque clears.
How does it work?
If someone has a cheque that needs clearing immediately, cheque cashing offers the option of paying a fee to bypass the normal three-day waiting period. There's a waiting period because a cheque basically acts like written instructions between two financial institutions and the waiting period gives both institutions time to make sure the payment is made correctly.
Lenders that provide cheque cashing services are essentially forwarding the money with no guarantee that the cheque will not be dishonoured. Cheques are dishonoured for a number of reasons, although a common one is that there are insufficient funds in the payer's account. Cheque cashing providers will forward the money for a fee, which is usually a percentage of the cheque amount, as they wait for the cheque to clear. Applicants must provide 100 points of identification.
Types of cheques that can be used
Different service providers will have different criteria, but may generally honour the following types of cheques:
Account payee cheques
Gaming and lottery cheques
Which lenders can cash my cheque?
The following lenders have branches and offer cheque cashing services:
Options for cashing a cheque
Take the cheque directly to the bank/branch and request the money to be deposited in an account OR deposit the cheque at the bank's ATM. Both of these options mean there will be a wait for the cheque to clear which can range from three to five days. If the funds are required urgently there are options to request a special clearance but this may incur a fee and will depend on the bank.
Alternatively, you can take the cheque to be cashed at a cheque cashing retailer, which may provide instant access to the funds but will also incur a fee.
Pros and cons of cheque cashing
Faster access to money. The cheque amount will be available immediately, instead of waiting three days for it to clear at the bank.
No bank account required. Cheques can be paid out in cash, which means a bank account isn't required to receive the money.
Transparent fees. Cashing cheques does cost a fee, but this will be upfront.
High fees. This may be a percentage of the cheque amount or a fixed amount. The fee will vary between different providers and can often be quite high.
Restrictions. Some providers may refuse certain types of cheques or have limits on the amounts that can be cashed out.
How to compare cheque cashing services
Cheque cashing providers can be an option for you to consider if you need a shorter turnaround time for your cheque, but it's important you choose the right provider. Here are a few things to keep in mind when comparing your options:
Turnaround time. As this is likely to be the main reason you're opting for cheque cashing services, you should check how quickly you can expect to receive the money. Some lenders may be able to provide you the money within a few minutes, while others may take longer.
Fees and charges. All cheque cashing providers are likely to charge fees, but the question is how much? Some may charge you a flat fee, while others may charge you a percentage of the cheque amount.
Restrictions. Some providers may have restrictions as to the kinds of cheques they'll cash, whether they be business, personal, government or another type. They're also likely to have limits on the cheque amount they're able to cash. Check these restrictions before you apply.
Alternatives to cheque cashing
A payday loan may be an alternative to cheque cashing if you need access to money straight away. Payday loans are short term loans and can provide a fast turnaround on cash if needed. However, it's important to know that payday loans are usually high cost and must be paid back within a relatively short time frame, so compare all the options before applying.
Sunshine Short Term Loans
This is a short-term loan offer with a fast and easy online application for good or bad credit borrowers. You can apply today to get approved for up to $2,000. Get your loan funded in 30 minutes - conditions apply.
Loan Amount: $2,000
Loan Term: 9-14 weeks
Turnaround Time: 30 minutes - conditions apply
Fees: 20% of loan amount + 4% of loan amount each month
Generally, it's safe to use a cheque cashing service, but it's important to be clear on what all the fees are before committing to the service as prices can vary dramatically.
How much as the fees?
This will vary depending on the service provider. Some charge a flat fee while others will charge a percentage of the cheque amount.
What's needed to use the service?
This will also vary by provider, but generally, identification is required. The cheque, personal identification and if it's a cheque being cashed on behalf of a business or company, a business registration may also be required.
Matt Corke is Finder's head of publishing for rest of world and New Zealand. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates.
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