About 95 percent of U.S. households have access to an account at either a bank or credit union, according to the FDIC. But there are still 7.1 million households that are unbanked, and the Federal Reserve estimates that another 13 percent of American households are underbanked, which means they use alternative financial services like check cashers or payday loans.
For the unbanked, cashing a check can come with high fees. For example, people who received paper stimulus checks collectively spent more than $66 million cashing them. And the Financial Health Network found that Americans who used alternative financial services in 2018 spent $189 billion on interest and fees. While the primary reason cited for not having a bank account was not having enough money to meet the minimum balance requirements, the fees associated with alternative financial services like check cashers can be even more costly than bank fees. But many people choose to use these services because the pricing is more transparent.
If you’re currently spending money to cash your checks, you have a few options to reduce your fees or eliminate them altogether.
Your Bank or Credit Union
The easiest way to cash a check is to go to a bank or credit union where you hold an account or use your institution’s mobile deposit feature and access the cash through an ATM withdrawal. Typically, banks and credit unions don’t charge account holders a fee to cash their checks. And if you’re away from your local credit union, you may be able to cash your check at another credit union that participates in shared branching.
If you don’t currently have a bank or credit union account because you are worried about fees, you might consider opening an account at an online bank. Online banks are often able to waive many of the fees that physical branches charge because they have fewer operating costs.
If you have had issues with overdrafting in the past, you may have difficulty opening an account at an institution that uses ChexSystems to review your banking history. However, there are several online banks that don’t use the system or run a credit check, so you can open an account even if you’ve had issues in the past.
There are also banks that offer “second chance” checking accounts, but these often come with maintenance fees. Still, most institutions give you the option to upgrade to a traditional account after a period of time. It may be worth paying fees for a limited time until you can access a regular checking account.
Checkwriter’s Bank
Many banks will allow you to cash a check for free if the person who wrote the check has an account there. You can find the name of the issuing bank on the lower left corner of your check. Some banks may still charge a fee to non-customers, so be sure to ask.
You can also walk into a bank where you don’t hold an account and cash a check, though some institutions may refuse to serve you. Most banks will charge a flat fee, which can sometimes be less than the percentage charged at a check-cashing outlet. There are even a few banks that offer free check-cashing for non-customers, though there may be dollar limits.
Retail Stores
Many grocery stores and big box stores offer check-cashing services. While most retailers charge a small fee to cash a check, some may offer the service for free. If there is a fee, it’s usually much less than it would cost to cash a check at a payday loan store or check cashing operation. These services can cost up to 5 percent of the check amount, while cashing a check at a retailer may cost as little as $1.
Prepaid Cards
Depositing a check to a prepaid account is another option. Most prepaid cards come with fees, but it’s possible to avoid them in some cases. For example, some cards waive monthly fees as long as you use the card to make a purchase each month. Most prepaid cards come with mobile apps that you can use to deposit paper checks. If your card was issued by an institution with a physical branch, you can also typically deposit your check in-person.
Endorsing a Check to Someone Else
If you don’t have a bank account but a trustworthy friend or family member does, you can endorse the check to that person and ask them to give you the cash. You’ll need to write “pay to the order of” followed by the person’s name on the back of the check above your signature. Check with your financial institution to make sure they will cash endorsed checks before you try this.
FAQ
Can I Cash a Check Online?
Yes. There are several services that allow you to cash a check online, but these often come with fees. If you don’t need the money right away, you may be able to avoid fees. Some websites, such as PayPal, provide free check cashing if you can wait for the check to clear to get your money.
How Do I Cash a Check Without a Bank Account?
The cheapest option is to go to the checkwriter’s bank and find out if they will cash the check for free or for a small fee. You might also visit a grocery or retail store to cash your check or deposit the money onto a prepaid card and then access the cash through an ATM. You should avoid visiting payday loan stores or check cashing outlets to get your cash, since these services can come with high fees.
What Is the Cheapest Way to Cash a Check?
The cheapest way to cash a check is to keep an account at a bank or credit union that doesn’t charge any fees or makes it easy to avoid fees. Most Americans will be able to find a fee-free online bank account, even if they’ve had banking issues in the past.
The information contained herein is provided for free and is to be used for educational and informational purposes only. Consult a financial professional for specific help with your situation.