Patrick-Murray Administration's Division of Banks Study Finds Banking Fees Less Costly than Check Cashers
Consumers can avoid costly check casher fees by having a basic checking account
BOSTON - September 27, 2010 - The Patrick-Murray Administration's Division of Banks today announced the release of a report comparing check casher and basic banking fees, finding that check-cashing entities are more expensive to use than a basic checking account at a bank.
The Division's study demonstrates that, on average, consumers will pay 4 to 40 times per month the maximum fees charged to maintain a basic checking account to cash weekly payroll checks and write money orders. Annual check casher fees would range from $139.62 to $1,424.36 to cash weekly payroll checks and write money orders. In contrast, a Basic Checking Account charges $3 per month, or $36 per year for baseline services.
"Consumers pay significantly higher fees when bringing their checks to check-cashing companies compared to the minimal costs of having a Basic Checking Account at a bank," said Barbara Anthony, Undersecretary of the Office of Consumer Affairs and Business Regulation. "It makes better financial sense for a consumer to have a relationship with a local bank."
Based on rate information collected from 43 state-licensed check-cashers and the parameters set forth in the Basic Banking for Massachusetts Program, the Division conducted a review to compare the fees a consumer would pay to utilize the services of a check casher as opposed to the costs of having a Basic Checking Account.
The Division's review determined the average percentages charged by check cashers to cash a variety of checks -payroll, insurance, government, lottery, drafts, personal, drafts and money orders- ranged from 2.39 percent up to 6.83 percent of the check's face value. ( Read the entire report here .) State law does not set or limit fees for cashing checks; however, check cashers must post a schedule of fees and charges in a clear and conspicuous place within each business location.
"The fee posting requirement allows consumers to compare fees among the Massachusetts licensed check cashers. However, many consumers are unaware that by having a low-cost checking account at a bank they can avoid paying a fee each time they cash a check," said Steven L. Antonakes, the Commissioner of the Division of Banks. "Opening a basic checking or savings account is the initial step in developing a banking relationship. This relationship opens the door to increased access to credit and other banking services for the individual."
Basic checking accounts, an alternative to utilizing check casher services, are offered by Massachusetts banks in collaboration with the Massachusetts Community and Banking Council's voluntary Basic Banking for Massachusetts Program. The purpose of the program is to encourage Massachusetts banks to establish low-cost checking and savings accounts which would allow individuals typically unable to afford these services to establish banking relationships.
The Basic Checking Account requires $25 to open the account, charges a maximum monthly fee of $3, and provides at least 15 free withdrawals including at least eight checks per month. Also available is the Basic Savings Account that requires at least $10 to open, charges a maximum monthly fee of $1, which is waived on all account balances of $10 or more, and pays interest on all account balances of $10 or more.
The Basic Banking for Massachusetts program is available in the majority of cities and towns throughout the Commonwealth as it is offered at over 120 banks, or 60 percent of all bank branch locations in the state. A listing of banks participating in the Basic Banking for Massachusetts program is included in this release and can also be obtained by calling the Massachusetts Community and Banking Council at (857) 350-4916.