The Money Mart scam

When I was young, I did all kinds of different jobs. One summer, I did a lot of different work on a construction site where new homes were being built on the side in addition to a regular job I had. The hourly pay was great, but it was terribly exhausting. I was only able to do it for a short period of time, but the extra paycheque was going to translate into some well-earned fun.

My foreman gave me my cheque on a Friday evening. It was $1400, which was a lot of money to me back then. I wanted to leave that night for a weekend of fun with cash in my pocket. Unfortunately, when I arrived at my bank, they were closed for the day. I wondered what to do, and saw the Money Mart store across the road. A big sign in the window promised payday loans and cheque cashing services. The cheque I had was a business cheque from a reputable company, so I figured there wouldn't be a problem.

When I walked in, I was presented with a huge application form by the lady behind the counter and had to present three pieces of identification. I was okay with this process, given that they need to protect themselves from fraud. The lady behind the glass advised me I would have to pay them 10% of the value of the cheque. I choked on this a little because it would mean it would cost me $140 to cash a cheque, but reasoned that they are open later than banks and therefore would charge premium rates. Besides, I reasoned that they would take on greater risk than a normal bank, and would need to make up for losses with these rates. After considering this, I consented and turned over the application form, my 3 pieces of identification, and my paycheque.

I waited. And waited. And waited some more. After half an hour, I was called to come up to the counter. The cashier behind the glass advised me that they would not be able to cash my cheque for me, because the bank for the cheque was closed, so she was unable to verify whether the funds for the cheque were available.

I remember exactly what I said to her, word for word: "Of course the bank is closed! Why would I come here and pay you $140 to cash this cheque, when I could go to the bank and cash it for free?" I pressed her to justify the existence of Money Mart, and she explained to me that if I established an account with them today, I would be able to borrow money from them. I told her I was only interested in getting a cheque cashed, and since she could not do that while the banks were closed, a person would have to be crazy to pay Money Mart for something the banks would do for free. I realized it was a big scam. I thanked her for wasting my time, demanded that she tear up my application, and give me back my cheque and identification.

All was not lost. I had a department store credit card with Sears, so I caught the next bus to the Oshawa Centre. I had a balance due on my Sears credit card. I used my paycheque to pay off this credit card balance, and then Sears gave me the remainder balance in cash. They did not charge me any fees for this service, and were happy to do it without calling a bank. I then set out to have a wonderful weekend.

To me, Money Mart is a scam. A person is better off getting a regular credit card. Consider that, at present, Money Mart requires a person to have a bank account with a bank. If you have a bank account, why would you go to Money Mart to cash a cheque? If you need a loan, they're going to charge $21 per $100 borrowed, with an APR of 521%. These are short term loans, you are expected to pay it back in two weeks. This means if you borrow $500, you'll pay them back $605. Compare that to a credit card; most will charge less than 21% interest, but if you pay off the balance in full when it's due, you never pay any interest or fees. This means, if you need a "Payday" short-term loan, you're much better off using a bank credit card and paying that off the balance in full in two weeks at no cost, versus paying Money Mart $21 per $100 no matter what.

If you're trying to build good credit, you can do that by simply paying your bills on time. That will go much further than having an account with Money Mart. In fact, the only thing I think Money Mart is good for is to take advantage of poor people, making them poorer. My advice to anyone stuck in a Money Mart cycle is to do everything you can to break out of that cycle. When a department store credit service offers greater service for less, you know that it's a terrible deal.