A St. Paul community bank is using its check-cashing service to attract customers.

University National Bank runs the service from a teller window in its one branch. The bank hopes the customers will eventually use other banking products and services.

"Our goal is to get people into mainstream banking," said David Reiling, a vice president at the $22 million-asset bank.

Banking experts say serving customers without bank accounts is a good opportunity for banks such as University National, which is based in a low- income neighborhood. But few community banks are trying to grab a slice of that market.

The Federal Reserve estimates that 7% of white Americans and 33% of nonwhites do not have bank accounts, and that most of these people make less than $20,000 a year. The Treasury Department estimates that 10 million Americans don't have bank accounts.

Some regional and national banks have already discovered the "unbanked" consumer. First Chicago NBD Corp. and Chase Manhattan Corp., for example, operate check-cashing businesses separate from traditional bank branches.

Karen Thomas, director of regulatory affairs for the Independent Bankers Association of America, said it is trying to find ways for community banks to attract customers who don't have bank accounts. University National's check-cashing business "is a perfect example of how to do that," she said.

University National is competing with three other check cashers in its area. It charges from 1% to 8% of each check amount, a fee Mr. Reiling called competitive with standard check cashers.

Donald Anderson, president of the Minnesota Community Financial Service Centers Association, a trade group for check cashers, said their charges average 2.5% to 3% of the check amount, but some charge an additional service fee.

Though University National uses its two-year-old check cashing business to attract customers, another community bank that offers the service has a different strategy.

In fact, it is hard to tell that the six Fast 'n Friendly check-cashing centers in Baltimore are owned and run by subsidiary of Provident Bankshares there.

"If a (check-cashing) customer elects over time to become a bank customer, that's fine,"said Gary Beisel, group manager of community banking at $3.5 billion-asset Provident. "But that's not our whole purpose."

Though their strategies differ, Provident and University National both see check cashing as a way to cash in on welfare and Social Security recipients, whose benefits will be distributed electronically in 1999.

With the 1999 deadline approaching, Mr. Beisel said, other banks might be wise to consider buying or starting a check-cashing business.

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