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Cash Advances vs. Check Cashing Stores: Which is Worse?

Written by
Alex Huntsberger
Alex Huntsberger is a personal finance writer who covered online lending, credit scores, and employment for OppU. His work has been cited by, Business Insider, and The Motley Fool.
Read time: 4 min
Updated on February 7, 2024
young man with glasses wondering cash advances vs. check cashing stores: which is worse?
When you need cash and only cash, should you take out a high-interest advance against your credit card or pay to cash a check?

These days, most transactions happen electronically. People can send money to one another quite easily through their bank accounts, apps on their phones, or social media.

However, sometimes you need cash instead of electronic funds. Maybe you’re stranded at a rural gas station or eating at a diner that doesn’t accept credit cards; whatever the reason, the need for cash can leave you in a pinch. If your bank has an ATM nearby, that is your best bet. Your other choices, like a credit card cash advance or going to a check cashing store, aren’t so good.

Neither option is great, but which option is better? Let’s find out.

What is a cash advance?

When you use your credit card to buy something, no physical money changes hands. The amount that you pay is added to your credit card balance. In other words, you are borrowing money from your credit card company to make a purchase.

With a cash advance you are also borrowing money from your credit card company, but it comes in the form of cash. However, taking out a cash advance on your card differs from making a normal credit card charge in two crucial ways:

  • First, most credit cards carry a separate Annual Percentage Rate (APR) for cash advances, and the APR for cash advances is almost always higher. For example, you might have a 15% APR on your normal credit card transactions, but a 25% APR for cash advances!
  • Second, regular transactions on a credit card come with a 30-day grace period before interest begins to accrue. If you pay off the card balance during that period no interest will be charged! Cash advances, on the other hand, have no such grace period. The second the transaction is made, interest starts being charged on the amount withdrawn.

What’s a check cashing store?

Check cashing stores will take your check and charge you a one-time fee in order to cash it. They may provide other services too, like payday loans, wire transfers, bill payments, public transportation passes, currency exchange, and mail services.

As an example, you may bring them a $500 check and they may charge you a two percent fee. That means it would cost you $10 and you would receive $490 in cash from them. Fees for cashing your check will vary from business to business, but they are usually a couple of percent.

Check cashing stores are generally used by those who don’t have traditional checking or bank accounts. These are people who receive a physical paycheck and need to have it turned into cash in order to use it. They can also use the store to transfer their bill payments. According to a 2021 survey by the Federal Deposit Insurance Corporation (FDIC), there are 5.9 million “unbanked” households in the U.S.

So which is it: a cash advance or a check cashing store?

It depends. The reason we say that so often is because it is almost always true. There are very few hard and fast financial rules that apply to every single person and situation. Circumstances will dictate which option is the best one for you.

However, we are going to give the win here to check cashing stores for one simple reason: that one-time fee is far preferable to a high APR.

Getting a check cashed is safer and (probably) cheaper.

When given a choice between paying a flat, one-time fee or accruing interest over a period of time, the flat, one-time fee is almost always preferable. You pay it, get it out of the way.

Interest, on the other hand, grows over time. If you’re able to pay off your cash advance immediately, it could very well be the better, cheaper option. But if you let the interest accrue, you could end up paying way more than you would have with a cashed check.

For reference, a $500 cash advance with a 23% APR would accrue almost $10 in interest per month and over $115 in interest over an entire year.

If you’re in a bind that only cash can solve, consider a check cashing store. Cash advances may do in a pinch, but their traditionally higher APRs make them more dangerous.

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