I've been hearing a growing amount of bellyaching over check cashing services. Today, Seth Godin says (in a blog about 'fear'):

• Why do people struggling for an income end up using an expensive check cashing service when the bank right next door will let them have a checking account for free?

You want to know why, Seth? Because you can't put a lien on it, and you can't be turned down if you've written bad checks in the past.

Look, I think Seth Godin is the bee's knees, but this has to be the most ignorant thing he's ever written. His argument is essentially "what? Have they no bread? Why then, let them eat cake!"

When Pamela and I first moved out to L.A., we managed to overdraft funds from two bank accounts. A simple clerical error on our part resulted in a few overdraft fees. We've all been there, right? Add to that the expense of moving halfway across the country, the fact that only one of us had a job lined up in L.A., and the substantial increase in our cost of living (our rent in L.A. was almost twice what we paid in St. Louis.) We resolved the issue, but due to our altered financial position it took us two years to do so.

I'm not saying all this for any kind of pity, but just to show how easy it is to work yourself into a messed-up situation. Our situation was our situation. We took responsibility for it and fixed it. But were it not for the check cashing place around the corner from our apartment, things would have been much stickier.

I think in every case the answer is the same: Internal noise. [I got a few notes about check cashing services, by the way. In many cities, there are banks that have sensible policies for low income customers, and most jobs that use a payroll service like ADP offer direct deposit. The combination would save a large number of people a lot of time and money, and my point isn't that there are enough financial services available to the less fortunate (there aren't) but that if it weren't for a fear of banks, plenty more people would take advantage of the services that are available. $5 a week for check cashing might account for 30% of someone's disposal income, which is a sin.]

I call 'bullshit'. Those of us who have actually used check cashing services, and I would venture to say Seth has not, did not do so out of 'fear.' Many of us did so -- and continue to do so -- out of some neccesity.

And there is some benefit to this. Look, when you're living hand-to-mouth, and your resources are limited, living on a cash basis actually makes sense. You can't spend what you don't have, and you have to keep your priorities straight. "Checking account" plus "modest means" can easily equal bounced checks, and then you're not talking "$5 a week", you're talking overdraft fees in excess of $20 a pop. So god help you if the last item that clears was the one large purchase you made, and the ones that bounce are $5 here, $10 there. I think B of A's maximum number of overdraft items is 7. So in such a case we're talking at least $140 in fees.

(BTW, even banks charge to cash checks for non-customers, $5 last time I checked. This is a relatively new phenomenon, one no doubt fueled by the fact that people aren't idiots, and if a bank will cash the thing for free, why go to a check cashing place? Check cashing places offer other services, such as pre-paid debit cards, Western Union, and pay day loans. I don't recommend the latter, but if the bank won't approve a small loan due to credit issues, what choice do you have?)

What truly astonishes me about Seth's blog is that he is endorsing a brown cow, banks, instead of addressing an actual need, and proposing/seeking out a purple cow: a check cashing place that doesn't suck.

I can see how using the check cashing service becomes a routine, something that some people never break out of. I believe the answer is better education. Remember "home ec?" How about teaching kids how to budget and stick to that budget, and little by little improve a bad financial situation? Teach them how credit ratings and lines of credit function, and how to avoid financial pitfalls?

I'm not endorsing check cashing places. They do suck. They are far from ideal. But when you need them, they're a godsend. A piece of paper with a dollar amount on it is worthless if you can't convert it to cold hard cash.