A company's commercial about their cheap check cashing

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pstlpkr

Lifer
Dec 14, 2009
9,694
31
Birmingham, AL
Hi Guys,

I know this isn't about food, or smoke, or even the weather, but about something that burns me up. I suppose it bothers me that companies are using convenience and the financial ignorance of the population, to make an almost unearned profit.

I post this just to give you some "food" for thought.

My mother-in-law said something like "Wow, that sounds like a good deal. Cheaper than where I go", last weekend.

Well here's a MBA's perspective on certain retailers check cashing commercials.

First: They make $3 for every check that is cashed.

Second: They deposit that check, the time it now takes for processing earns interest.

Third: They move the newly processed money back into the pool that they cash the check from. (which also earns interest.) That pool of money is the company's investment, or basically the wholesale purchase cost for a product unit.

While a 3 to 5 day waiting period (on checks in excess of $250) may not seem like much. The theoretical financial laws governing Economy of Scale are in play.

That $3 dollar service charge has earned them (I'm guessitmaing here) another 15 to 25 cents. Multiply that by (Oh let's say for argument's sake) 25,000 checks cashed in one week. Minus $2.00 per check for processing costs and advertising. That's in the $30,000 dollar ballpark on those 25,000 checks. But, I would think that the actual number of checks is probably three to five times that amount, probably more considering there are approximately 300 million people in the US. This is a very low routine weekly estimate. Using the lower end of the weekly estimate puts the weekly income from this service around $100,000 a week or $5 million dollars a year. (This figure is in all probably vastly greater.)

Also, as a side note about "Gift Cards"... In the fine print of the buyers agreement, there will be an inactivity clause that invalidates the card after a period of time. Generally around 2 years. While the card may have a face value equal to the selling price, have you ever wondered who is paying for the card itself and the merchandising materials that are attached?

Most cards will never be used in its entirety, a good many are simply lost or forgotten. There will usually be a few cents, or a dollar of two left on the card. Sometimes the card is used with cash and the entire value is used. (in this last example the company loses that few cents)(That's called risk, but its minimal in the light of the theoretical laws governing Economy of Scale.) This money paid by the consumer for the card is placed into an account that (of course) earns interest. When the card expires any remaining value automatically become property of the seller company, and that money is like the check cashing is moved back to the main pool, (or company investment). Any return in excess of the companies original investment is profit.

It may seem like a shell game, and to some extent it is. I just wanted you all to know the basics behind these seemingly innocuous transactions that are presented as convenience to the buying public.

 

wallbright

Part of the Furniture Now
Aug 22, 2010
845
2
Very interesting Lawrence. I never knew that so much goes on just in cashing checks and purchasing gift cards.

 

collin

Part of the Furniture Now
Oct 29, 2010
881
2
Oklahoma
I love it Lawrence,...now tell them about those mail-in rebates that are jammed down your throat at the big electronics stores.

 

admin

Smoking a Pipe Right Now
Staff member
Nov 16, 2008
8,764
4,932
St. Petersburg, FL
pipesmagazine.com
It may seem like a shell game, and to some extent it is. I just wanted you all to know the basics behind these seemingly innocuous transactions that are presented as convenience to the buying public.
That's what you are paying for - convenience.
This is also a good example of how being educated and smart can save you money.

 

fred

Lifer
Mar 21, 2010
1,509
4
Thanks for the information on this grey area of finance.

The people it most affects are those who can least afford

such customary and morally bankrupt financial practices.

 

pstlpkr

Lifer
Dec 14, 2009
9,694
31
Birmingham, AL
mail-in rebates

It's simply an interest on the money thing, based on economy of scale.

They make interest on the money that passes through their hands.

And, more often than you might suspect... those rebates aren't claimed.
Talk about your sleeper strings.... It's 8 months old.

But, "food for thought" as we enter the Holiday Buying Season.
:)

 

collin

Part of the Furniture Now
Oct 29, 2010
881
2
Oklahoma
I was told that the reason companies used rebates was because a small percentage of people never send them in for one reason or another. The ones that are sent in get ignored for as long as possible with the thought that most people forget about them.

I can't remember what the percentage of mail in rebates that are actually paid, but it was relatively small.
I can recall several rebates I had to chase down and I have no idea how many I forgot about and probably never received.

 

igloo

Lifer
Jan 17, 2010
4,083
5
woodlands tx
Over the years I have purchsed many computer items and have yet to get a rebate check for any of them ASUS , GIGABYTE , and all the video card guys . I also got a American Express Travelers card instead of the checks . The damn thing did not work at about half of the places I wanted to use it . So there I was , my credit cards at home 1600 hundred miles away . GRRRRRRRR

 

fredvegas

Starting to Get Obsessed
Jun 2, 2010
192
0
These check cashing places, and their even more evil counterparts, the payday loan places, are illegal in some places, and hopefully will be illegal all over the country before too long. 3000-4000% EAR? Unconscionable.

 
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