Why Some Banks Charge Non-Customers to Cash Checks

Originally published @Factoidz.com.

Is it legal for banks to charge a fee just for cashing a check drawn off them? Find out why some banks charge a check-cashing fee for non-customers.

I have worked at several different banks. Some charge non-customers to cash checks written from their institution. For example, if you do not have any accounts with ABC Bank, and your mother wrote you a check from her account there, you may go to ABC Bank to cash the check. However, if you don't have an account there, they may charge a fee, often a few dollars such as $5 or $6. Many customers get angry at this and say the bank is stealing their money and this is illegal.

I understand why people get mad when they simply want to cash a check, whether they have an account or not. After all, ABC Bank can verify that the funds are in your mother's (or whomever wrote you the check) account. They know what their checks typically look like, so there's less of a chance for it to be fake. They have the signature on file to compare if necessary, and the contact information to get in touch with the customer just in case anything seems suspicious. Isn't that enough to protect the bank? Why do they have to charge a fee for someone just to cash a check drawn off that financial institution??

First of all, banks are not obligated to cash any checks for anyone if they do not have an account with them. This includes government checks as well as checks drawn off them. (Such as an ABC Bank check brought to ABC Bank to cash.) Banks need to have enough cash on-hand to take care of their customers (read: account holders) first and foremost. They do not like to hold surplus cash if possible, as this puts them more at risk of loss.

If you use ATMs outside your network, you will often incur fees; how is check-cashing at a bank "outside your network" any different? Walmart, liquor stores, and other check-cashing businesses will charge you a fee to cash checks, why shouldn't banks when you don't have an account with them? They are providing a service to you. Nothing is free these days, some will say!

If you have a checking or savings account elsewhere, you can always simply ask ABC Bank to check if the funds are available and take it to your own bank to cash or deposit. Of course, even if the funds are available right that moment, there is no guarantee they will be available in a few hours. After all, the person who wrote you that check may be on a shopping spree that very moment and depleting their bank account balance! Bringing their check to ABC Bank to cash will provide you with peace of mind knowing that the funds are there and you have cash owed to you without wondering if their check will bounce. However, if you are unsure about the person's financial situation and doubt the check will remain good for long, maybe you should consider no longer accepting checks and request other payment options, such as cash or PayPal, just to give two alternatives.

Just because that bank has the account holder's signature and information on file doesn't mean someone will never bring in a fraudulent check. Perhaps Grandma's drug addict daughter stole her checkbook and can duplicate her signature very well. Perhaps Mother is sick or cannot see very well or in the hospital and doesn't know she is signing a check for $5000... There are many possibilities and opportunities for fraudulent activity to present itself. According to bankrate.com, "There is no federal law or regulation that requires national banks to cash checks for noncustomers. Most banks have policies that allow check cashing services only for customers who have an account with them in order to protect both themselves and their customers from forgeries. Once a national bank cashes a check that has been forged by a noncustomer, they may lose money if they cannot collect from the person who cashed the check. Also, if a national bank agrees to cash a check for a noncustomer, it may legally charge the presenter a fee."

Also, any non-customer waiting in line is making it longer for the account holders to wait in line.

Yes fees of $5 and $8 are high and do add up, but if you want to cash the check at that bank, you will have to pay the fee. I personally am okay with fees, but think they should be lowered to only $1 or $2 at the most.

Many smaller banks or community-based/local banks with only a few branches do not charge a fee and will cash checks drawn off them for customers as well as those who do not own accounts with them. Many of the larger banks do charge a fee and also have the right to refuse service to anyone coming in to cash a check. Some banks will only charge to cash a check drawn on a business while others charge for both personal and business check cashing. Some banks only charge the check-cashing fee if the check is over a certain amount, such as $50 or $100. Most tellers do not have the discretion (or can get into serious trouble) for waiving these fees, so please don't get angry with them for simply doing their job. They didn't make the rules and may not agree with the fees, either.

Sources

personal teller experience

Banks Can Refuse to Cash Some Checks

Yes, Some Banks Charge to Cash Checks -- Even Their Own Checks

Noncustomer Check Cashing Charges