The American Prospect reports the US Postal Service has — finally! — begun piloting several postal banking programs.
In four pilot cities, customers can now cash payroll or business checks of up to $500 at post office locations, and have the money put onto a single-use gift card. It's the most far-reaching executive action that the Biden administration has taken since Inauguration Day.
According to USPS spokesperson Tatiana Roy, the pilot launched on September 13 in four locations: Washington, D.C.; Falls Church, Virginia; Baltimore; and the Bronx, New York.
According to the article, Prospect art director Jandos Rothstein successful cashed a business check at the Falls Church post office and converted it into a Visa gift card:
"At first, [the postal worker] said she didn't think she could take the check," Rothstein said. "But she read the check into her scanner and it went through." He didn't need to show identification or endorse the check. The post office charged Rothstein a flat fee of $5.95, for any amount up to $500.
Several larger check-cashing chains charge a percentage rate that comes out to $15 or more for a $500 check. Walmart charges between $4 and $8 for check cashing.
A generic gift card, an existing product sold at post office locations, can be used like a bank debit card, either to take money out of an ATM (though that would, for now, incur fees), or pay for goods and services either online or at point-of-sale retail locations.
When I say "fucking finally!" I fucking mean it. Nearly every other country on the planet offers banking services through their post office system. President Taft had previously introduced a US Postal Savings System in 1910 to fight back against predatory lending. It offered a guaranteed 2% interest rate, and the post office was legally required to redeposit that money into local banks to stimulate the local economy; the USPS got to keep whatever additional interest they accrued to cover operating costs. By the end of World War II, there was nearly $3.4 billion invested in the Postal Savings System. But the system was shuttered in 1967 because — guess what! — private banks were booming in the postwar economy, and lured the public back to them with lofty promises like higher interest rates.
To return to a full postal banking system would be a serious boon for a lot of Americans. As it stands, nearly 35 million US households — that's 28% of the country — either don't currently have a bank account, or regularly rely on alternative financial services like check-cashing services and payday loans for other reasons, costing them about 10% of their annual income on average. Meanwhile, 59% of U.S. post offices operate in zip codes where there is just one bank or no bank at all. Even with just the limited financial services offered by banks right now, this makes a difference — consider the fact that rural post offices already sell 27% more money orders per capita than offices in urban areas. Access makes a difference!
According to an extensive white paper put together by the USPS, those unbanked and underbanked Americans spent a combined total of about $89 billion on interest and fees from alternative financial services in 2012. Imagine how much they could save — and how much more money the post office could make! — if those kinds of services were offered through a trustworthy, legally-bound-to-not-screw-you-over public service like USPS.
These new pilot programs aren't quite there yet; converting checks into Visa gift cards is still a pretty limited service. But it could be the start of something good.
USPS Begins Postal Banking Pilot Program [David Dayen / American Prospect]
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