Wal-Mart Expands Check Cashing Services


Retailing giant Wal-Mart (WMT) announced Monday that it is expanding its check-cashing services at its Wal-Mart Money Centers. Now customers need only park the car once to load up on groceries, personal care staples, and electronics while cashing checks from an even larger array of sources, including pre-printed checks made out to them from insurance companies, student loans, pension, 401(k) accounts, and IRAs.

The big-box retailer's move further drives it into the check-cashing industry, which typically operates in low-income neighborhoods where traditional banks are few and far between.

It's a sign of the times, with more big-box retailers like Sears Holdings' (SHLD) Kmart moving into the check-cashing business.

"Everyday Low Prices" for Access to Quick Cash

Like it does on many products and services, Wal-Mart's check-cashing fees largely undercut those charged by a typical check-cashing outlet, where consumers pay an average of 2% to 4% of the face value of the check to cash it.

In New York, for example, it costs $18.60 to cash a $1,000 check and $93 for a $5,000 check in a check-cashing store. Those rates are set by the state Superintendent of Banks. By contrast, Wal-Mart charges $3 to cash checks up to $1,000 and $6 for checks up to $5,000.

"This expanded program now enables Wal-Mart to bring everyday low price cashing services to more customers who have a need for immediate access to their cash," Daniel Eckert, head of Wal-Mart Financial Services, said in a statement.

Convenience Will Keep Check-Cashing Stores Around

Stephen Altobelli, a spokesman for the Financial Service Centers of America -- which represents mom-and-pop to publicly traded check cashing stores -- isn't too worried about Wal-Mart putting his members out of business or forcing them to match prices. He says most of the customers who use check-cashing services live in the inner city where banks and big box retailers like Wal-Mart and Kmart are typically not found.

Plus, Wal-Mart does not offer its check-cashing services in all states. Citing state restrictions, Wal-Mart does not operate its check-cashing business in New York, New Jersey, or Rhode Island. And in Florida, it is limited to checks with a value of up to $2,000. The retailing giant doesn't cash personal checks, either.

A Cheaper Option for a Still-Crummy Problem

Though consumers can save money cashing checks at Wal-Mart, it can still be more expensive than a typical checking account. It also does little to address the approximately 9 million U.S. households that a 2009 Federal Deposit Insurance Corp. report says are "unbanked" with no current checking or savings account.

According to the FDIC report, the main reason people cited for not having a traditional bank account is a lack of money to make it worthwhile. Meanwhile, roughly 30% of people without a checking or savings account use check-cashing services, and a whopping 81% use money orders, the report states.

The survey found that the majority of underbanked households go somewhere other than banks for money orders and check cashing because of convenience. And with Wal-Mart offering all sorts of consumer goods and groceries, the convenience factor is increasing in their favor.

Motley Fool contributor Dawn Kawamoto does not own stocks in any of these companies mentioned. She has, however, been known to shop at Wal-Mart and has perked up at the sound of a Kmart "blue light" special. The Motley Fool owns shares of Wal-Mart. Motley Fool newsletter services have recommended buying shares and creating a diagonal call position on Wal-Mart.

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