Last year, Illinois state residents cashed 20 million checks at currency exchanges and paid millions of dollars to do it. Why are one third of Chicagoans still using currency exchanges?

Although currency exchanges charge up to 1.85 percent of a check to cash it, some Illinois consumers feel the convenience is worth it.

It all started in Chicago during the great depression. When local banks shut their doors, a handful of wealthy Chicagoans decided to open up their wallets and cash work checks for a small fee. Sixty-five years later, some of the same families are still in the currency exchange business, and they have built long-term relationships with their customers.

“I’ve been with them like for 20 years. I cash my work check here, too,” says Lourdes, a currency exchange customer.

For customers like Lourdes, and others who were in too much of a rush to talk to us on camera, the convenience factor is a one reason they keep coming back.

“I’m a divorcee and somehow things get difficult in your life. This is easier. I pay my bills here. I do everything here. I live nearby,” Lourdes says.

“People need to have alternatives. Not everyone fits in with a bank. Not everyone fits in with the internet,” says John Iberl, Community Currency Exchange Association of Illinois.

Lourdes, like 60 percent of currency exchange customers, has a bank account, and still cashes all her checks here instead of at her bank.

“They find out for one reason or another it’s less expensive to deal with us or it’s more convenient in the same way you would go to a convenience store and possibly pay a nickel more for a gallon of milk,” says Jerome Gagerman, currency exchange owner.

Except you’re not paying 5 cents to cash a check — you’re paying nearly $8 for every $500 check you cash. And over time, that convenience adds up.

Ilyce: “How much money do you think you spent?”

“At least $5,000 to $10,000 that I could have right now saving in an account somewhere with nice interest. Plus, paying your bills. For everything you do, you’re getting charged. Even for an envelope,” says Robert Reyes, former currency exchange customer.

“We offer many free things. Online banking, internet banking, and several other services the customer can take advantage of as well,” says Angel Beltran, MB Financial Bank.

“It’s not the big money that kills us. It’s the little money that falls through our fingers. Currency exchanges, they have their place. But you can’t save any money at a currency exchange,” says O.S. Owen, Center for Economic Progress.

On the other hand, you can have your paycheck or social security benefit check direct deposited to the currency exchange, and then pick it there rather than waiting for it to arrive in your mailbox.

“We’re talking about one-stop shopping for financial services,” Gagerman says.

“I think the consumers of Illinois benefit from the fact they don’t have to pay a lot for the services that in other states, like Indiana, for example, where to purchase a money order is $10 which is pretty costly,” says Michele Latz, director of financial institutions.

“Our clients vote with their feet every day,” Gagerman says.

The Department of Financial Institutions says it only received 110 complaints on 44 million currency exchange transactions last year. It attributes the low complaint threshold to tough regulation. But to really gain traction financially, you have to have a place to save and grow your cash, and financial experts say having a bank account is the place to start.

Illinois is one of the least-expensive places in the country to cash a check. For comparison purposes, I’ve included some of the currency exchange check-cashing fees in other states. The “check casher fee schedule” information is collected by the Financial Service Centers of America (FISCA) and was provided to WGN by the Department of Financial Services. These fees are subject to change.

In the state of Illinois, the fees are as follows: 1.4 percent of the face amount plus a service charge of 90 cents on all checks of $500 or less. 1.85 percent on checks above $500. All fees charged must be posted in a readily visible place inside the currency exchange.

Arkansas 5 percent of the face amount for state public assistance, social security, any federal or state checks; 10 percent for personal checks or money orders; 6 percent for other checks.

California 3 percent with ID for payroll or government checks; 3.5 percent without ID or $3, whichever is greater.

Connecticut 1 percent for state-drawn checks; 2 percent for all others

Florida 5 percent of the face amount with ID; 6 percent without ID, or $5, whichever is greater; 3 percent with ID or 4 percent without ID is the check is for state public assistance or social security; 10 percent or $5, whichever is greater, for personal checks or money orders.

Hawaii 3 percent of face amount of $5, whichever is greater, for state public assistance or social security; 10 percent or $5, whichever is greater, for personal checks or money orders.

Indiana 10 percent or $5, whichever is greater.

New York 1.5 percent of the amount on all checks, except there is no fee limitation for the cashing of commercial checks.

West Virginia 1 percent of the face value cashed or $1, whichever is greater.

The following states have no limits on how much a currency exchange can charge for the cashing of a check. If you are traveling to one of these states, and plan to cash a check there, be sure you know ahead of time how much you will be charged: Massachusetts, Minnesota, Nevada, Utah, Virginia, Washington, Wisconsin.

The following states do not regulate currency exchanges: Alabama, Alaska, Colorado, Idaho, Iowa, Kansas, Michigan, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, and Wyoming.

To file a complaint against a currency exchange, contact the Department of Financial Institutions

Illinois Department of Financial Institutions

Department of Financial Institutions Director: Michele Latz

Chicago Division of Financial Institutions
James R. Thompson Center
100 West Randolph Street
Suite 15-700
Chicago, IL 60601
312/814-2000 312/814-7138 TDD

Springfield Division of Financial Institutions
320 W. Washington
Springfield, IL 62786
217/782-2831 217/785-3022 TDD

Published: Feb 3, 2005