The Philadelphia pawnshop at the corner of Lancaster Avenue and Brooklyn Street wanted $16 to cash my paycheck.
The Money Mart near Ninth and Market would charge $24 to give me my money.
Luckily I have a bank account, so I didn't have to fork over part of my pay last week to get cash. But some residents regularly pay fees ranging from 2 percent to cash payroll checks to 10 percent for personal checks because they lack bank accounts.
Some experts predict that check-cashing outlets will go the way of the dodo bird as more people switch to moving money digitally. But the industry has shown recent revenue growth and has no shortage of customers.
Roughly 4 percent of area households are "unbanked," meaning they don't have checking or savings accounts, according to a 2015 survey by the Federal Deposit Insurance Corporation. An additional 19 percent in Greater Philadelphia are considered "underbanked" because they have bank accounts but still use alternative financial services like check cashers.
These bankless consumers not only incur high transaction costs to cash checks and pay bills through third parties, but they also miss out on future opportunities for traditional loans by not establishing a financial history, experts and advocates say.
For many of the unbanked, however, traditional banks seem unwelcoming and more costly. The prospect of recurring overdraft charges, hidden fees, and minimum balance requirements make consumers leery of opening bank accounts. In the 2015 FDIC survey, the most commonly cited reason for being unbanked was not having "enough money to keep in an account."
The result is a two-tiered financial system — one for those in poverty and one for the rest of us — that feeds into false narratives, says William Hall, the financial empowerment program manager for the City of Philadelphia.
"What we are inherently saying is that this type of institution is for this type of person and this type of institution is for this type of person," Hall said. "That 'othering,' I think, just perpetuates the divide we see amongst the haves and the have-nots that perpetuates poverty."
Hall helped relaunch Bank On Philadelphia, which works to reduce the number of unbanked and underbanked consumers in the city. The nationwide Bank On project, run by the Cities for Financial Empowerment Fund, encourages financial institutions to offer low-cost accounts, particularly those without overdrafts.
Overdraft fees may be the most difficult banking cost to bear. The fees, typically $35 each, are incurred when users spend more money than what's in their checking accounts. In many cases, the transactions triggering the charge are less than the fee itself.
Consumers pay $17 billion annually in overdraft and "non sufficient fund fees," according to the Consumer Financial Protection Bureau. Most of this revenue comes from a small group of people. Just 30 percent of consumers overdraw their checking accounts, according to the bureau, and the 8 percent who overdraft more than 10 times per year account for 74 percent of overdraft fees. These consumers are charged $380 in overdraft fees on average annually, the bureau says.
"Sometimes people have [bank accounts] and then they get hit with overdraft fees and it ends up costing them a lot more than they even thought about," said Patty Hasson, president of Clarifi, which offers free or low-cost financial counseling in the Delaware Valley.
She said consumers who rack up overdrafts will close their accounts and be hesitant to try again, or they'll be listed in chexsystems — which banks use to evaluate customers — as too risky to get a second chance at another bank.
Sen. Cory Booker (D., N.J.) introduced a bill Thursday that would rein in overdraft fees by limiting the number of charges to one per month and six per year and requiring fees to be proportional to the cost of covering the overdraft.
Bank On calls for accounts that don't allow overdrafts. In many cases, these accounts decline transactions when there are insufficient funds. Bank On also advocates for accounts that require just $25 or less for an initial deposit and impose small, transparent monthly maintenance fees.
David Rothstein, a principal with the CFE Fund, acknowledges accounts without overdraft service may generate less money for banks. But he argues those accounts also mitigate risks for financial institutions. "You're trading some higher fees for a predictable fee structure," he said.
Four banks in Pennsylvania offer Bank On approved accounts: Bank of America's SafeBalance Banking Account; First Commonwealth Bank's SmartPay Card; KeyBank's Hassle-Free Account; and Wells Fargo's EasyPay Card. Bank On's certified accounts in New Jersey include Chase Liquid and Citi Bank's Access Account. These products can be found online by searching the names of the accounts.
"Low- and no-cost bank accounts without overdraft fees are widely available," said Nessa Feddis, the American Bankers Association's deputy chief counsel for Consumer Protection and Payments. "We are still trying to crack that nut to get people who, for whatever reason, don't find [banking] attractive."
One reason may be that check-cashing outlets, while charging high fees for individual transactions, can be more convenient and transparent than banks in some instances.
There are large swaths of the city with poor access to formal financial institutions, the Federal Reserve Bank of Philadelphia found in a March study on branch closures. From 2010 to 2016, 383 banks, credit unions, and thrifts have closed in the Philadelphia metropolitan area, including 74 within the city, according to the study.
"If you drive through certain commercial corridors, you won't see a bank, but you do see check cashers, you do see pawnshops," said the city's Hall. "So part of it is just there's not a bank within proximity of certain folks."
Some consumers also prefer check cashers because they can provide money immediately, display their fees clearly in the store, and are sometimes open 24 hours a day, said Lisa Servon, a University of Pennsylvania professor and author of The Unbanking of America: How the New Middle Class Survives. She worked as a check casher in New York's South Bronx for four months in 2013.
"Ultimately I found out people were making rational decisions a lot of the time," Servon said. "It wasn't because they didn't know how much money they were paying and if they could get a cheaper deal."
She recalled a woman who paid $2 to withdraw the last $10 on her electronic government benefits card, effectively paying 20 percent of all she had. The decision may seem foolish, but Servon noted ATMs typically don't provide small denominations of money.
"She needs that eight bucks right now," Servon said. "There's no other way she can get that money."
Check-cashing revenues grew 4.2 percent in 2016 to $2.1 billion, and the service was projected to have continued moderate growth in 2017, according to a market study by the Center for Financial Services Innovation.
Money Mart near Ninth and Market had six people waiting in line in the morning and again in the afternoon one day last week. The place cashes payroll checks for a 3 percent cut and cashes personal checks and money orders for a 10 percent charge.
Servon, though, believes the days of the check-cashing businesses are limited, as more people deposit funds electronically rather than use paper checks. "Their profits are being more squeezed as those trends continue to happen and as it becomes easier to deposit checks to your phone, " she said.
Hasson, the Clarifi president, emphasizes that unbanked consumers not only lose money on check-cashing fees but also lose out on opportunities for low-interest loans later.
"It's a pathway to other financial products," she said. "If you are looking to get a traditional loan, being banked and having a history in a checking and savings account is a benefit."
Alan Nesbitt, a Clarifi counselor, said long-term goals, like buying a house, are often better motivators to get people banked than telling consumers they are losing money with other financial services.
"The strongest thing that gets people into banking is if they need something from the system," Nesbitt said. "Overnight, they get banked."