Payday Loans Near Me US Report: Statistics and Facts

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?

Financial services that are available at the post office could assist many Americans
By Kat Tretina
Updated April 28th, 2022
Reviewed by JeFreda R. Brown
The factual information is verified by Skylar Clarine

With postal banking, your local post office provides some basic financial services, much like a commercial bank. Postal banking is widespread in much of the world and was once within the United States. Now some advocates believe returning it could be a cost-effective solution for the nation's vast unbanked population.
Important Takeaways

Postal banking is a common practice in many countries, but hasn't been seen in the United States for decades.
Advocates believe that bringing it back can make low-cost banking accessible to people with lower incomes Americans.
Approximately 7.1 millions American households do not have savings or checking accounts.1
Account minimums and high fees often prevent customers to open accounts.
Customers who aren't banked depend on merchants for financial services such as check cashing or bill payments that can be costly.

The way Postal Banking Works

Through postal banking, the post office in your area serves as a sort of bank branch. For instance, it could provide cash for checks, bill payment processing, as well as small loans.

Presently, U.S. post offices do not typically provide the services mentioned above, but they do offer postal money orders as a convenience for people who must pay off a debt or to send money safely to someone else but don't have a checking account. Cashing money orders at any post office.

In the past, post offices weren't that restricted. From 1911 until 1967, there was a time when 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 the interest rates for savings accounts, the demand of 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 in which data were available in 2019, more than five percent of the households (about 7.1 million total) were unbanked, meaning that nobody in the household has a savings or checking account at a financial institution or credit union.1 For those households, the most basic banking services such as the ability to cash a check can be prohibitively expensive.

According to a 2019 survey by the Federal Deposit Insurance Corp. (FDIC) The majority of households that are not banked are those with low incomes and lack access to a bank or credit union due to reasons such as:

Account minimums are too high. The most commonly cited reason was that the household did not have enough funds to satisfy banks' minimum balance requirements.
Untrustworthiness. Many people said they didn't trust banks with their money.
Fees. Unpredictable (and often exorbitant) charges like overdraft fees, monthly account fees, and withdrawal charges--deter some customers from opening or maintaining accounts.3

Without access to a checking or savings accounts, households that are not banked are forced to use check-cashing establishments as well as payday loan centers to conduct financial transactions such as cashing paychecks and paying utility bills. At one check-cashing chain in California, for example the fees range from 1.79% to 14.99 percent of the face amount, depending on the nature of the check.4

Postal banking advocates claim that the system of banking through the post office would not only allow low-income individuals to cash their checks at lower costs, but they would also be able to stay away from lenders who are predatory. The ability to visit the post office to get small loans could reduce their dependence on costly alternatives, such as payday lenders.5
Current Status of Postal Banking Proposals

In 2014, banking on postal mail saw renewed interest thanks to the release of a white paper by the U.S. Postal Service Office of Inspector General. The paper noted that unserved households paid more than $2400 annually for interest and fees from financial institutions other than the Postal Service, and postal banking could cut the cost dramatically.6

The white paper started discussions about alternatives for the under-served Americans. In 2020, Sen. Kirsten Gillibrand (D-N.Y.) was the sponsor of a bill, the Postal Banking Act--that would allow 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, launched a small pilot postal bank program across four major cities. A few post offices will offer services such as cash-checking bills, bill payments, and ATM withdrawals.

The Postal Banking Act and the postal banking pilot program have met with significant opposition from both Republican the leadership of Congress as well as banks. It was reported that the American Bankers Association (ABA) released a statement that said, "The American Bankers Association has been an active opposition to postal banking and has previously noted that it could be viewed as a government-backed bank that competes with tax-paying banks, and would pose risk that USPS is not suited to manage."

The ABA maintains that, rather instead of using the Postal Service, the answer to the problem of people who aren't banked should be found at its branches. "It's much easier than ever before to create a bank account in this country, with Bank On-certified accounts, which are now in operation in more than 50% of U.S. bank branches, and have low cost, no overdraft fees and robust capabilities for transactions like a debit card or prepaid credit card, and online bill payment," the ABA says.8
Is postal banking a thing?

Postal banking is the practice of providing basic banking services in local post offices. That might include things like cashing check or bill pay as well as small loans.
What are the benefits of banking via postal mail?

Advocates say that postal banking may offer financial services to millions of Americans who aren't currently banked offering them a cost-effective alternative to costly check-cashing shops as well as payday loan providers.
What's the argument for postal banking?

A large portion of the U.S. private banking industry believes they believe that the U.S. Postal Service is ill-equipped to expand banking services to other services and that many banks have programs at a low cost that can better serve the unbanked populace.
The Bottom Line

Postal banking is becoming increasingly mentioned as a solution that could be beneficial to low-income households that aren't able to access traditional credit unions or banks. Although postal banking has seen some support in Congress in the past few years, it faces significant opposition from banks. Unless postal banking becomes widespread, most people will still rely on credit unions and banks (or check-cashing shops and payday loan purveyors) for banking services.
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