By Becky Yerak

January 12, 2011

Twenty-three Kmart stores in Illinois and three other markets are testing financial centers where consumers can cash checks and pay bills. Kmart joins Wal-Mart in offering basic services to consumers who have little if any access to traditional banks.

“We’re looking at how to better utilize the real estate in our stores and to better serve our customers,” said Shannelle Armstrong, spokeswoman for Hoffman Estates-based Sears Holdings Corp., which owns Kmart. Seven of the Kmart stores are in Illinois, 10 in Los Angeles, five in Puerto Rico and one in Wisconsin.

Wal-Mart for years has housed similar money centers in hundreds of its stores. “We’re adding money centers to many of our stores,” Bill Simon, chief executive of Wal-Mart Stores Inc.’s U.S. operations, said in September. “That piece of business has been a rapid growth area for us.”

Wal-Mart has money centers in about 40 percent of its nearly 3,000 Supercenters, according to a September article in trade magazine U.S. Banker.

Wal-Mart charges $3 to cash a check up to $1,000. Many check-cashing services have charged from $6 to $15. Wal-Mart charges a $6 fee to cash checks up to $5,000. Wal-Mart bill payment fees are 88 cents for standard three-day delivery, and start at $3.95 for express payments, where notification occurs in 10 minutes.

Kmart’s pilot financial centers are staffed by company employees, said Armstrong, who declined to provide other details.

The seven Illinois Kmart financial centers are in Chicago stores at 3443 W. Addison Ave., 5050 S. Kedzie Ave., 7050 S. Pulaski Road and 1360 N. Ashland Ave.; in Zion at 3355 Sheridan Road; in Montgomery at 1900 Douglas Road; and in Forest Park at 7630 W. Roosevelt Road, the company said.

Some estimates indicate that up to 10 percent of U.S. families are unbanked, meaning they don’t have a checking or savings account. A 2009 Federal Deposit Insurance Corp. study said a substantial share of the U.S. population may be “underbanked”; they might have a checking or savings account, but have used non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year. Tom Feltner, vice president for Woodstock Institute, a Chicago-based nonprofit research group focused on fair lending issues, said he wasn’t surprised by Kmart’s move, but said consumers shouldn’t become dependent on retailers for financial services over the long term.

“Those services ideally should be provided in the context of a broader, lifelong relationship,” Feltner said. “It is not enough to merely cash checks or conduct transactions; a banking relationship needs to include creating a good credit record, saving, borrowing responsibly and building assets.”

The Kmart initiative, which also includes money transfers and money orders, is headed by Susan Ehrlich, president of Hoffman Estates-based Sears Financial Services. On Monday she was named to the Federal Reserve Board’s consumer advisory council, which advises the board on its duties under the Consumer Credit Protection Act and on other matters related to consumer financial services.

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