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Postal Service Gets into Banking, Again

Post offices haven't cashed checks since 1967

Two postal workers hang a sign on the  exterior of the Hamilton Mail Processing Center building in Hamilton, NJ.

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The U.S. Postal Service is getting back into financial services, something it hasn’t offered for 55 years. The new services will start off small. For a flat fee of $5.95, customers in Washington, D.C., Falls Church, Virginia, and the Bronx, New York, can cash payroll or business checks (up to $500) on to a debit card. If all goes well, the Postal Service says customers could eventually pay bills, deposit and withdraw cash, and send money to other post offices. The idea is to cater to the millions of Americans who don’t have access to a bank.

“It’s a huge problem for the unbanked and the underbanked who often get caught in the payday lending and cash-checking predatory process,” says American Postal Workers Union President Mark Dimondstein. “Low-income people, whether they are actively working or retired, spend up to 10 percent of their income on these fees and services. Here you have a trusted public institution that already provides basic financial services such as money orders."

For years, the Postal Service has been bleeding money forcing it to close offices and cut services. The COVID-19 pandemic proved how useful the Postal Service can be, with the nation’s mail carriers getting supplies and COVID-19 test kits to residents. Proponents argue the Postal Service can do more helping rural communities and unbanked adults with their basic banking needs. In early March, Congress passed the Postal Service Reform Act, which removes budget rules that played a role in 14 years of losses. It also makes it law that mail is delivered six days a week, excluding federal holidays.


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Postal savings system shut down in 1967

The idea of going into a post office to cash a check may wax nostalgic. After all, it was in 1967 that the Postal Service stopped providing banking services. Prior to that, the Postal Savings System was a powerhouse, holding billions of dollars in assets at its peak. It was the only game in town where your money was protected by the federal government. That all changed when the Federal Deposit Insurance Corporation (FDIC) was created in 1933 and bank deposits were guaranteed by the federal government. Demand for postal banking eventually faded away.

Today, most people use banks to save their money, but there are still millions of Americans who are unbanked or lack a checking or savings account. They typically rely on costly check-cashing services or payday loans to get paid.

Among the unbanked households in America, AARP found 3.1 million were headed by someone 50-plus. Of those, 13 percent are African American/Black households while 11 percent are Hispanic/Latino households. When you count those who use check cashers and payday lenders, there are roughly 14.2 million households 50 and older that don’t access mainstream financial services. Even for those who do have bank accounts, accessing their local branches, particularly in rural neighborhoods, is becoming more difficult. In 2021, over 4,000 bank branches shuttered, setting a record for closures in one year.

Post office banking needed in rural areas

In small towns that may only have a single gas station, restaurant and post office downtown, traveling a long distance to the bank is not viable. Doing your banking at the post office is. Of its more than 31,000 post offices, over 17,000 are in neighborhoods with one or no bank branches. It is those hard-to-reach households the Postal Service is trying to reach.

Some services the Postal Service can offer without a change in law include:

  • Paycheck cashing
  • ATMs in postal lobbies
  • Bill payment
  • Electronic money transfers

To offer savings accounts and small-dollar loans requires an act of Congress. “This brings needed revenue to the post office, but it wouldn’t bring the revenue on a predatory basis,” says Dimondstein. “It’s bringing revenue with fair prices that doesn’t fleece the people of the country.”​

Donna Fuscaldo is a contributing writer and editor focusing on personal finance and health. She has spent over two decades writing and covering news for several national outlets, including The Wall Street Journal, Forbes, Investopedia and HerMoney.​