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      Table of Contents

      How Postal Banking Works
      Postal Banking and the Unbanked
      Current Situation 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
      The factual information is verified by Skylar Clarine

      In postal banking, your local post office offers some basic financial services, like commercial banks. Postal banking is widespread across the globe and was once throughout the United States. Some advocates are now suggesting that bringing it back could be an affordable solution for the nation’s vast non-banked population.
      The most important takeaways

      Postal banking is commonplace in many countries, but hasn’t been seen in United States for decades.
      Advocates believe that bringing it back can make low-cost banking accessible to those with low incomes Americans.
      Around 7.1 millions American households do not have savings or checking accounts.1
      Account minimums and high fees often hinder individuals from opening accounts.
      Customers who aren’t banked depend on merchants to get basic financial services, such as checking cash or making payments on bills and can be expensive.

      How Postal Banking Works

      Postal banking is a type of banking that the post office in your area acts as a bank branch. It could, for instance, provide check cashing and bill payment processing as well as small loans.

      In the present, U.S. post offices don’t typically offer these services, though they do sell postal money orders, a convenience for people who have to pay off a debt or to make a secure transfer of money to someone but who don’t have an account with a bank. Recipients can also cash money orders at any post office.

      In the past, post offices weren’t that restricted. From 1911 through 1967 until 1967, the U.S. had a Postal Savings System, where Americans could put their money into banks that were government-backed and yielding interest. As commercial banks increased their interest rates on savings accounts, demand for Postal Savings System decreased. Postal Savings System declined, and the program came to an end in 1967.2
      Postal Banking and the Unbanked

      Within the U.S. in 2019, the most recent year in which data were available over 5% in households (about 7.1 million total) were unbanked, meaning that no one in the household has a checking or savings account with a bank or credit union.1 For those households, the most basic banking services such as the ability to cash a check can be prohibitively costly.

      According to a survey conducted in 2019 by the Federal Deposit Insurance Corp. (FDIC), most unbanked households are low-income and lack access to a credit or bank union, due to:

      Minimum balance requirements for accounts are high. The most commonly mentioned reason was because the household didn’t have enough funds to meet the banks their minimum balance requirements.
      Untrustworthiness. Many people stated that they don’t believe in banks’ ability to manage their money.
      Fees. Unpredictable (and often exorbitant) charges like overdraft fees, monthly account fees, and withdrawal charges–deter some customers from opening or keeping accounts.3

      With no access to a check or savings accounts, households that are not banked use services such as check-cashing stores as well as payday loan centers to conduct financial transactions, such as cashing checks and paying utility bills. At one check-cashing chain in California for instance fees can be as high as 1.79 percent to 14.99% of the face value according to the nature of the check.4

      Postal banking advocates argue that a postal banking system would not only permit low-income people to cash checks at less costs, but they would also be able to stay away from lenders who are predatory. The ability to visit a post office for small loans could reduce their dependence on costly alternatives like payday lenders.5
      Current Status of Postal Banking Proposals

      In 2014, banking on postal mail saw renewed interest due to the release of a white paper by the U.S. Postal Service Office of Inspector General. The report stated that the underserved households spent more than $2,400 per year for interest and fees from other financial sources and postal banking could cut the cost dramatically.6

      The white paper started fresh discussions on options for the under-served Americans. In 2020 the senator. Kirsten Gillibrand (D-N.Y.) sponsored a bill–the Postal Banking Act–that would allow for the Postal Service to provide basic financial services. She was joined by co-sponsors Sen. Bernie Sanders (I-Vt.) and Sen. Jeff Merkley (D-Ore.).7

      In October 2021 The Postal Service, in partnership with the American Postal Workers Union, began a pilot of a small postal banking program in four cities. A few post offices will offer services such as cash-checking, bill payments, and ATM withdrawals.

      It is known that the Postal Banking Act and the postal banking pilot program have come under major resistance from the Republican the leadership of Congress and banks. It was reported that the American Bankers Association (ABA) released a statement that said, “The American Bankers Association has been vocal for a long time as an opponent of postal banking, and has also previously stated that it could be perceived as a government-endorsed bank that competes with tax-paying banks, and would pose risks that USPS is not suited to manage.”

      The ABA insists that, more as using the Postal Service, the answer to the problem of the unbanked is to be found at its own branches. “It’s much easier than ever before to open a bank account in this country, with Bank On-certified accounts. They are now accessible in over half of U.S. bank branches, and have low cost with no overdraft charges, robust transaction capabilities such as a debit or prepaid credit card, and online bill payment,” the ABA says.8
      How do you define postal banking?

      Postal banking refers to the provision of basic banking services at local post offices. It could be things like cashing check, bill paying, and even small loans.
      What is the advantage of banking via postal mail?

      Advocates say that postal banking could make financial services available for the millions Americans who are not currently banking and offer them a lower-cost alternative to expensive check-cashing stores and payday loan providers.
      What’s the reason to oppose postal banking?

      A large portion of the U.S. private banking industry believes that the U.S. Postal Service is ill-equipped to include banking in its other services and that many banks are now offering low-cost services which could be better suited to the currently unbanked population.
      The Bottom Line

      Postal banking is being increasingly discussed as a solution that could be beneficial to low-income households that don’t have access to traditional credit unions or banks. Although postal banking has seen some progress in Congress in recent years, it is a target for banks. Unless postal banking becomes widespread and widely accepted, the majority of people will still rely on banks and credit unions (or check-cashing stores and payday loan purveyors) for banking services.
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