Indeed, postal banking was available for more than 50 years. In 1911, Congress encouraged individuals—predominantly immigrants—to make savings deposits in the Postal Savings System (PSS), rather than hiding cash at home. The system peaked in popularity in the 1930s, when few trusted the banks after numerous bank runs and failures.1
- The depositor received a 2% interest rate from the PSS, and a guarantee in an era before the Federal Deposit Insurance Corp. (FDIC) insured deposits.
- The PSS then put the cash into a local bank.
- The banks only paid the PSS 2.25%, a lower interest rate than what they paid to other depositors.
- The bank then lent the money to community businesses, pocketing any profits made on the difference.
The system was phased out in 1967, as more consumers turned to now-FDIC-insured banks and higher-rate U.S. bonds for better returns. However, the USPS still provides money orders, electronic fund transfers, and U.S. Treasury check-cashing services.