The following questions were submitted to John Roska, an attorney/writer whose weekly newspaper column, "The Law Q&A," ran in the Champaign News Gazette.
How much can a check cashing place charge to cash checks?
If you’re talking about a currency exchange, there’s a maximum charge set by law. That maximum charge depends on the size of the check you’re cashing.
For checks under $100, the maximum fee is 1.4% of the check amount, plus $1. That means the total fee could range from $1 to $2.40.
For checks over $100, the maximum fee is 2.25% of the check amount. That means this fee would start at $2.25, and go up.
But, fees for checks under $500 won’t be individually calculated. That is because the law requires currency exchanges to set the fees for cashing checks under $500 in “brackets.” That’s “a set fee to be charged uniformly for cashing all checks . . . within a certain range of stated face amounts.”
Therefore, the fees on checks up to $500 will be set at dollar amounts, rather than individually calculated. Fees in those “brackets” can’t exceed the maximum amount an individually calculated maximum fee would be.
For example, there could be a $1 fee for all checks up to $25, and then a $1.25 fee for all checks up to $50, then a $2 fee on all checks over $75, and keep going. As long as the fee for the lowest amount in each “bracket” didn’t exceed the maximum rates set out above, the rates would be legal.
Merchants can cash checks, too, but only as a sidelight. Specifically, the law says that a merchant’s check cashing must be “incidental to the main business of the merchant.” The law defines a merchant as “a person, firm, association, partnership or corporation primarily engaged in the business of selling tangible personal property at retail.”
The maximum fee a merchant can charge for cashing a check is 50 cents, or 1% of the check’s face value—whatever's greater. The maximum fee could therefore be 50 cents on checks under $50, and 1% on checks over $50.
Merchants can't charge any fee for accepting a check for the amount of a purchase. The law prohibits fees “where a customer presents a check for the exact amount of any purchase.” Merchants however, don't have to accept those checks.
Banks don’t have to cash checks for non-customers—except maybe checks drawn on that bank. An argument can be made that the law requires a bank to cash a check drawn on its own account, but if they refuse you’d probably have to settle the argument in court. National banks regulated by the Office of Comptroller of the Currency can charge a fee for cashing checks drawn on an account at that bank, as long as their fee is set “in accordance with safe and sound banking principles.” The federal regulations don’t set any specific limits, though.
Currency exchanges must be licensed, and must display their license and the fees they charge. In addition to the limits on their check cashing fees, currency exchanges also have limits on money order fees. That limit is 75 cents, plus 1% of the amount of the money order.