Pawnshops increasingly are offering a wide range of financial services -- from check cashing and bill payment services to money transfers and prepaid cards -- to attract consumers who lack access to traditional banks. However, warns Tom Feltner of the Consumer Federation of America, "consumers need to be aware that the products don't always carry the same protections as those you would get from a bank."
Not only are pawnshop patrons likely to spend more for basic services, they also will struggle to build a credit history since pawnshops do not collect or report data relevant to credit scoring. The services offered by pawnshops, meanwhile, are a valuable tool for drawing traffic to their core operation and cash cow: pawnshop loans. Interest on these advances, which use a personal item of value as collateral, run as high as 25 percent per month; plus, the stores can charge customers for storage, lost tickets, and other incidentals.