More on Making a Residing Off of Payday Loans Near Me US

Table of Contents

The way Postal Banking Works

Postal Banking and the Unbanked

Current Status of Postal Banking Proposals

Frequently Answered Questions

The Bottom Line

Personal Finance Banking

What is postal banking?

Making financial services available at the post office can assist many Americans

By Kat Tretina

Updated April 28th, 2022

Reviewed by JeFreda R. Brown

Facts checked by Skylar Clarine

Postal banking is where your local post office offers the basics of financial services, similar to a commercial bank. Postal banking is a common practice across the globe and was once available throughout the United States. Now some advocates believe the return of this service could be a low-cost solution for the nation’s vast non-banked population.

The most important takeaways

Postal banking is a common practice in many countries, but isn’t seen in the United States for decades.

The advocates believe that returning it can make low-cost banking accessible to those with low incomes Americans.

Around 7.1 million American households don’t have checking or savings accounts.1

Account minimums and high fees often stop people to open accounts.

People who are not banked rely on stores for financial services such as check cashing or bill payments and can be expensive.

How Postal Banking Works

With postal banking, the local post office also acts as a bank branch. For example, it might offer check cashing and bill payment processing and even small loans.

Presently, U.S. post offices don’t typically offer the services mentioned above, but they might offer postal money orders as an option for those who have to pay a bill or want to send money safely to someone but who don’t have accounts with a checking account. Recipients can also cash money orders at any post office.

Post offices of the past weren’t that small. From 1911 until 1967 until 1967, from 1911 to 1967, the U.S. had a Postal Savings System, where Americans could save their money in savings accounts that were backed by the government and earn interest. However, as commercial banks increased their rates of interest on savings accounts, the demand for the Postal Savings System declined, and the program ended in 1967.2

Postal Banking and the Unbanked

In the U.S. in 2019, the most recent year for which figures were available over five percent in households (about 7.1 million overall) were unbanked, meaning that none of the household has a savings or checking account at a bank or credit union.1 For those who live in these households, banking services such as cashing a check can be prohibitively expensive.

According to a study conducted in 2019 by the Federal Deposit Insurance Corp. (FDIC), most households that are not banked are those with low incomes and lack access to a bank or credit union for reasons that include:

Account minimums are too high. The most often mentioned reason is that the household didn’t have enough funds to satisfy banks their minimum balance requirements.

Untrustworthiness. Many people said they didn’t trust banks to handle their money.

Fees. Unpredictable (and often excessive) charges like overdraft charges and monthly account fees and withdrawal fees–block some individuals from opening or maintaining accounts.3

In the absence of a checking or savings account, people who aren’t banked use services such as check-cashing establishments and payday loan centers to conduct financial transactions, such as cashing checks or paying for utility bill. At one check-cashing chain located in California, for example the fees vary from 1.79% to 14.99 percent of the face value dependent on the kind of check.4

Postal banking advocates claim that a postal banking system would not just allow people with low incomes to cash checks at less costs, but additionally keep them from lenders who are predatory. The ability to visit an office in the post for small loans can help them stop relying on costly alternatives, like payday lenders.5

Current Situation of Postal Banking Proposals

In 2014, banking on postal mail was a hot topic thanks to the release of a white paper by the U.S. Postal Service Office of Inspector General. The report stated that the underserved households paid more than $2400 annually on interest and fees from financial institutions other than the Postal Service, and postal banking could reduce that dramatically.6

The white paper sparked discussions about alternatives for those who aren’t served Americans. In 2020 Sen. Kirsten Gillibrand (D-N.Y.) introduced a bill – the Postal Banking Act that would permit to the Postal Service to provide basic financial services. Gillibrand was joined by co-sponsors senators. Bernie Sanders (I-Vt.) and Sen. Jeff Merkley (D-Ore.).7

In the month of October, 2021, the Postal Service, in partnership with the American Postal Workers Union, began a pilot of a small postal bank program across four major cities. In select areas, post offices will offer services such as cash checking, bill payments, along with ATM withdrawals.

The Postal Banking Act and the postal banking pilot program have come under major criticism from both Republican leaders in Congress and banks. In a statement, the American Bankers Association (ABA) released a statement saying, “The American Bankers Association has been an active opposition to postal banking and has previously commented that it might be seen as a government-approved bank that competes with tax-paying banks and would create dangers that USPS is not suited to manage.”

The ABA maintains that, rather instead of the Postal Service, the answer to the problem of the unbanked is to be found in its branches. “It’s simpler than ever before to create a bank account in this country, with Bank On-certified accounts that are now in operation in more than half of all U.S. bank branches, and come with low fees with no overdraft charges, robust transaction capabilities like a debit card or prepaid card, and online bill pay,” the ABA says.8

How do you define postal banking?

Postal banking refers to the provision of basic banking services to local post offices. This could include things like check cashing as well as bill payment, and even small loans.

What are the advantages of banking via postal mail?

The advocates argue that postal banking could offer financial services to millions of Americans who are currently unbanked and offer them a lower-cost alternative to costly check-cashing shops and payday loan providers.

What’s the argument for postal banking?

It is believed that the U.S. private banking industry maintains it is that the U.S. Postal Service is ill-equipped to add banking to its other services and that many banks are now offering low-cost services that could better serve those who are currently not banked.

The Bottom Line

Postal banking is becoming increasingly mentioned as a possible solution for low-income households that do not have access to traditional credit unions or banks. While postal banking has seen some support in Congress in recent years, it has a lot of opposition from banks. If postal banking is not made widely available, most customers will continue to depend on banks and credit unions (or check cashing stores or payday loan purveyors) for banking services.