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What Is Postal Banking?

What Is Postal Banking?
Walecia Konrad
Walecia KonradUpdated July 13, 2023
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Postal banking is the simple idea of going to your local post office for basic banking services, such as cashing checks and paying bills. This was common decades ago, but when commercial banks started offering interest on savings accounts, postal banking fell out of favor and ended in 1967. The practice is still common in many countries around the globe, though, and has been back in the U.S. as of 2021.Now, however, advocates are looking at postal banking as a low-cost way to provide banking services to people who don’t have access to commercial bank accounts. 

How Postal Banking Works

Postal banking is the same as basic banking done at brick-and-mortar commercial banks. Your local post office acts like a bank branch, offering low-cost check cashing, bill paying, and ATM services.Monthly maintenance and other service fees can be unaffordable for many customers. As a result, unbanked consumers are often left with no choice but to use expensive check-cashing retailers or payday loans to access basic banking services.Recommended: Guide to Savings Account Fees and Costs

Postal Banking Services

Currently, the USPS does provide some limited financial services. Most branches sell money orders, which can be used to pay bills. The post office will also cash money orders for customers.Postal banking advocates are suggesting these financial services be expanded to include:
  • Low-cost ATMs
  • Electronic money transfers
  • Cashing paychecks
  • Electronic bill-paying services
  • Tests of other banking products

What Are the Pros of Post Office Banking?

There are many potential positives to postal banking, especially for people who may have trouble affording or qualifying for commercial bank and credit union accounts.Recommended: What Do You Need to Open a Bank Account?

Access for Those Without a Bank

A surprising number of Americans do not have bank accounts. About 5.9 million people, or roughly 4.5% of households, do not have a checking or savings account at a bank or credit union, according to a 2021 survey from the Federal Deposit Insurance Corporation (FDIC). The reasons people are unbanked vary, but in many cases, it may be that low-income people can’t afford the high minimum balance requirements or are unable to pay monthly maintenance and other unpredictable fees, such as overdraft and withdrawal fees.Postal banking would allow these individuals to perform routine banking tasks, such as cashing a check or paying a utility bill, without paying the excessive fees found at check-cashing retailers and payday lenders.Recommended: Community Banks: What Are They?

Access for People in Rural Areas

People living in rural areas and small towns that may not have a bank branch are likely to live near a post office. According to an AARP March 2022 report, of the 31,000 post offices in the U.S., over 17,000 are in neighborhoods with only one or no bank branches. For those residents, banking at the post office could help eliminate longer trips to the bank.  Recommended: 10 Key Benefits of Opening a Savings Account

Alternative for Areas with Closed Branches

Adding to the potential problem of access to branches is the fact that many banks are closing branches. In 2021, more than 4,000 bank branches closed, according to AARP, setting a record for the number of banks closed in one year. 

What Are the Cons of Post Office Banking?

Not everyone is an advocate of postal banking. Below are the cons of post office banking.

The Post Office Can’t Handle It

The American Bankers Association (ABA) worries that the USPS may not have the resources necessary to add banking to its other services. And, postal banking could be seen as a government endorsement of the service, something that could unfairly impact competition with commercial banks.In addition, more banks are offering no- and low-fee accounts as part of a community movement to reach unbanked customers, according to the ABA.

Services Offered by the Post Office May be Lacking

Commercial banks offer many more services and types of accounts than postal banking can, including small loans, high-yield savings accounts, and business bank accounts.

Online Banking May Make Postal Banking Irrelevant

Because online banks don’t have the high overhead that traditional banks do, they can offer many of the same services for lower costs. Many online accounts have no minimum balance requirements, charge low or no maintenance fees, and offer higher interest rates on savings accounts than traditional banks.Plus, with online banking, as long as customers have a smart phone, they have access to their bank and all of its services.Recommended: Guide to Savings Account Withdrawal Limits

What Is the Current Status of Postal Banking?

To understand the current status of postal banking, it helps to go back a few years.In 2014, the U.S. Postal Service Office of Inspector General released a white paper reporting that underserved, unbanked households spent an average of more than $2,400 a year on interest and fees paid to alternative financial sources. Postal banking might help reduce that burden.Spurred by the white paper, Sen. Kirsten Gillibrand (D-N.Y.), with co-sponsors Sen. Bernie Sanders (I-VT.) and Sen. Jeff Merkley (D-Ore.), introduced the Postal Banking Act in 2020. This would allow USPS to provide some basic financial services.By 2021, the pilot program began in a handful of cities. Expanding the program nationally would need congressional approval. The Postal Banking Act has not moved through the Senate, and some lawmakers oppose the Act and postal banking in general.

The Takeaway

Interest in postal banking is on the uptick in recent years as consumer advocates and some lawmakers look for ways to offer low-cost financial services to the unbanked population. Postal banking may offer an affordable alternative to expensive check cashing and payday services.Opponents to postal banking believe the low-cost need is already being met by many  banks and that the post office may have trouble expanding into so many new areas while still being able to perform its current duties effectively.The debate points out that searching for low-cost, high-quality bank accounts is important. Lantern can help you search for savings accounts with high interest rates and low fees.Explore high-yield savings accounts with Lantern by SoFi today.

Frequently Asked Questions

Does the post office offer banking services?
Who would benefit from post office banking?
When will postal banking be available?
Photo credit: iStock/Baris-Ozer
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About the Author

Walecia Konrad

Walecia Konrad

Walecia Konrad is an award-winning financial journalist with 25 years of experience in print and digital media. She is a graduate of Syracuse University and specializes in the topics of health care, personal finance, and employer-sponsored benefits. Konrad's work has been seen on CBS MoneyWatch, The New York Times, Money, SmartMoney, BusinessWeek, and Forbes. She has been the recipient of both a Pearl Award for Best Web Publication of the Year and a National Magazine Award for Personal Service.
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