Which of the following financial institutions typically have the highest fees?

Which of the following financial institutions typically have the highest fees?

A. Check cashing and payday loan companies

B. Internet banks

C. Credit unions

D. Brick-and-mortar banks

Answer: A. Check cashing and payday loan companies

Check cashing and payday loaners or lenders sustain the highest fees in comparison to all other financial institutions. These businesses mainly focus on the population that does not have an ATM/credit card or urgently needs small amounts of money. This is because their service charges are usually high given the fact that they take higher risks than firms which deal with standard customers who are financially stable.

For instance, check cashing services may make their consumers pay a fee that is proportional to the amount of cash they want to withdraw, usually, this fee is in percentage and can range between 1% and 12% depending on the kind of check and state laws. What this means is that cashing a $1,000 pay check may range from $10 to $120. On the other hand, most of the time, traditional banking institutions present free check cashing for the users of their certain accounts.

Especially, when it comes to payday loans, people are conscious of their rates and fees which are very high. An average payday loan with a duration of two weeks may cost from $10 to $30 for each $100 of the credit sum. This is something like an APR of 391% to 782% but how can that be possible? For instance, if one borrows $300 for two weeks, the fees charged amount to $45, which works to an APR of 391%.

Compared to other financial institutions, the fees are considerably higher here almost all the services provided. Some of the credit unions and online banks have relatively cheaper accounts as a result of the following factors. Some branches of traditional brick-and-mortar banks might charge some fees, but they are normally considerably lower than those of check cashing and payday loan companies.

Preliminary costs make the products worrying for any consumer who has to use check cashing and payday loan companies, so it becomes essential for the consumers to be made aware of hidden charges and seek other options.