When Thomas E. Nix Sr. and his son, Thomas Jr., found that they were regularly cashing checks for 4,000 customers at their grocery store on the edge of Watts, they decided that they were in the wrong line of work.
So the father-son team opened a business in 1978 where customers could cash checks for a fee but without the foodstuffs.
"As soon as we opened the doors, people started coming in droves," Nix Sr. said, and the Nixes almost immediately had to expand to 14 teller windows from the original four. The growth didn't stop there: Nix Check Cashing recently opened its 19th location in Southern California.
Such check-cashing outlets are popping up on street corners and in mini-malls in California and across the nation. Where dozens existed a few years ago, hundreds now dole out cash from behind bullet-resistant glass. Once found only in low-income or industrial areas, check-cashing operations are appearing in more affluent communities and attracting a better-paid clientele.
"The business used to be defined as the welfare bank," said one longtime operator of check-cashing centers. "Now you get mainstream workers--blue and white collar--and the locations look more like banks."
Owners of check-cashing outlets credit much of their success to the deregulation of financial services in the early 1980s. The increased competition within the financial industry that resulted caused banks to look for more profitable ways to do business, often at the expense of the small customer. Banks and savings and loans began to charge more for some services, such as checking, and to close branches, usually those in low-income neighborhoods.
But critics contend that those who go to check cashers with their payroll or government checks and then buy money orders to pay their bills are locked into a high-cost way of banking.
Even those who run check-cashing stores admit that the largely unregulated business is plagued by an unsavory reputation that they maintain is caused by a small segment charging big fees on checks, usually high-risk items. What's more, some established owners are worried about some small operators who are entering the business without insurance, with little security and even less experience.
For Chinatown resident Chawalit Asachinda, the issue is simple.
"I don't like checks. Banks charge too much," he said, emerging from a downtown check-cashing outlet with a wad of bills.
"I like to carry around cash. It makes me feel good. Women like men with a lot of cash."
Sara Olguin, who lives in downtown Los Angeles, doesn't have a checking account. Instead, she puts her retirement income into a savings account and pays her few bills with money orders.
"I think I just don't care for them or something," she said. "With checking, I think I would spend money on foolish things."
To a significant number of consumers, banks have become foreign territory. A survey conducted for the Federal Reserve Board in 1983 found that roughly one in five households did not have a checking account. Most were low-income people; for example, 36% of families with annual incomes below $8,400 did not have any bank accounts, the survey found.
To find out why, the American Banking Assn. commissioned a study two years ago that found that nearly half of those surveyed said they did not want or need an account. Many said they didn't have enough money to make a checking account worthwhile, could not afford an account or didn't trust banking institutions.
Check-cashing centers are generally run by small entrepreneurs who own one or a few outlets. Some small chains have appeared with 15 to 40 centers, and a few are even larger.
Until recently, Gulf & Western was the biggest name in the business, owning a chain of check-cashing stores in the Southwest called Associates Cash Express. The chain was sold late last year to its management and private investors, and the name was changed to Ace Cash Express.
In California and in most other states, check-cashing centers are unregulated by government; operators can charge whatever they like.
California check-cashing outlets once were required to charge no more than 1% of the face value of a check, but that limitation was lifted in 1981 by the Legislature after some operators complained that they were being hurt by inflation and competition.
Local consumer groups across the country that belong to the Consumer Federation of America report that check-cashing centers typically charge 1% to 2% of the face value of a check but charges can go as high as 10%, Executive Director Stephen Brobeck said. Money orders generally are sold for as much as $1 or $2 above face value, he said.
Expensive Way to Bank
Someone cashing $10,000 in checks a year would end up paying $200 in check-cashing fees at 2%, he said, not including the cost of money orders to pay bills.
"It's a very expensive way to do your banking," Brobeck said.