Money & Debt

The following question was originally submitted to John Roska, a lawyer Someone who represents clients in courts or who gives legal advice and writer for the weekly column "The Law Q&A" in the Champaign News Gazette. The article has been updated to include changes in the law and additional information.

Question

How much can a check cashing place charge to cash checks?

Answer

If you’re talking about a currency exchange, there’s a maximum charge set by law. That maximum charge depends on the type and amount of the check you’re cashing. No matter the amount, a currency exchange will charge a 1.5% fee for public assistance checks.

For other checks $100 or less, a currency exchange will charge:

• 2.45% +$1.00 for personal checks
• 2.4% +$1.00 for all other checks (like payroll, government, and insurance)

For checks between $1100.00 and $1,250.00:

• 3% for personal checks
• 2.33% for government and payroll checks
• 2.4% for all other checks

For checks greater than $1,250.00:

• 3% for government checks
• 3.5% for payroll, insurance, and all other checks

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 To resolve a case before finishing a trial 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.