You just received your paycheck and you're in a hurry. You stop at a check cashing store to get your green fast, but before you make that a habit, you should know how much check cashers are costing you.

You just received your paycheck and you're in a hurry. You stop at a check cashing store to get your green fast, but before you make that a habit, you should know how much check cashers are costing you.

A typical check cashing store is a business that allows customers to quickly get cash from a payroll, personal, or government check -- for a fee, of course. Grocery stores and mini-marts may also cash checks.

Check cashers charged an average of 8.77 percent for personal checks, and between 1 and 10 percent for paychecks, according to a 2006 survey by the Consumer Federation of America. As a percentage, the fee seems small, but find out the dollar amount before handing over your check; you might be paying more than you think.

A check cashing outlet usually offers other services too. One of the most dangerous of these services is the payday loan. A payday loan is a short-term loan, usually for about two weeks. Say you need $500, for example. You write a check cashing store a personal check for $575 ($75 being the fee), date the check for a future day after your next payday (called post-dating), and receive $500 right away in return. After your payday, the check cashing store deposits your $575 check or you can pay an additional fee to extend the loan.

The catch is that if you are so short on money that you need a payday loan, you may be short again after the next payday and the next. Roll over this loan three times, and you'll pay $225 in fees for your $500 loan, or an effective APR (annual percentage rate) of 390 percent! This is a vicious cycle that leaves you with less money than you had before you started. For more information about payday lending, search "payday loans" at ftc.gov.

Consider using a savings or checking account at an accredited financial institution. It can be safer and cheaper. Here's why:

• With an account, you can usually cash checks for free.
• Your cash is generally safer in an account than anywhere else.
• You can easily access your money at an ATM.
• Having an account may give you access to free services that check cashing businesses don't offer, like direct deposit and financial counseling.

You can usually set up an account in less than an hour -- one that will help you avoid excessive fees and keep better track of your cash.
 

Sources:

fisca.org; consumerfed.org; ago.mo.gov