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.
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.
