If you don’t have a bank account and need to cash a check or get an advance on your next paycheck, be sure to consider what it will cost you before visiting your local check-cashing store. Because the convenience such stores provide comes at a high price.

Paying a heavy fee for check-cashing—about $4 for every $100 on a payroll check, and even more to cash a personal check—may not sound like a lot at first, but as a college student you can't afford to waste a single dollar. It’s a better idea to open an account with a bank or credit union close to campus. Many offer free basic accounts to students and don’t charge you to cash a check. For more information, read the CashCourse articles in Banking Your Money.

Many check-cashing stores also make payday loans—small, high-interest, short-term cash loans—that can result in big trouble. Here’s how they work:

• Say that you need $100 and it's a week before payday.
• You write out a check to the check-cashing store for $120, and the store agrees not to cash it until your payday. (You first have to show proof that you can cover the check, such as a pay stub or other paperwork.)
• You get $100 cash that day, and the store cashes your check on the agreed-upon date, keeping the extra $20 as a loan fee. (Most stores charge between $15 and $30 for a payday loan.)
• If you don't have the money in your checking account on that date, you can extend the loan by paying additional fees and interest charges. Rules limiting the fees these stores can charge vary by state. Depending on the location, you might have to pay anywhere from 450 to 650 percent of your loan in fees and interest charges. That's $450 to $650 to get a $100 loan!

If you really need cash to cover the costs of an emergency or a major car repair and you can’t find an alternative solution, be a smart borrower. Make sure your payday lender is legitimate and that you fully understand your repayment responsibilities before you sign on the dotted line. Some suggestions:

• Check the legal status of payday lending in your state. Some states prohibit triple-digit interest rates on small loans.
• Shop around for the lowest rates and fees.
• Borrow only as much as you can afford to repay with your next paycheck.
• Know when your payment is due and be sure to repay the loan on time and in full.
• Avoid borrowing from more than one lender at a time. 

If you decide to get a payday loan, first visit www.paydayloaninfo.org, a site operated by the Consumer Federation of America, for accurate information.