Postal Service testing a new business: Check cashing

The U.S. Postal Service is undergoing an overhaul of its operations under Postmaster General Louis DeJoy’s 10-year plan, ranging from slowing down mail delivery to raising postage prices. Now, another change may soon be in store as the postal service tests a new offering to consumers: check cashing.

The USPS began testing a check-cashing service in September, a spokeswoman for the agency told CBS MoneyWatch. The pilot program is operating at USPS retail locations in Washington, D.C.; Falls Church, Virginia; Baltimore; and the Bronx, New York, the spokeswoman said. 

The USPS is testing the service as it struggles to staunch massive financial losses, which amounted to almost $3 billion in its most recent quarter. The agency’s tattered finances have sparked DeJoy’s 10-year plan, which he argues is necessary to redirect the USPS toward profitability. Yet the details of his plan, including slowing first-class mail delivery starting October 1, have sparked outrage from lawmakers and postal experts, who say it will harm Americans and businesses that rely on the USPS for essential mail such as payments. 

Yet the check-cashing pilot is gathering support from lawmakers who have been critical of DeJoy’s overhaul, such as Senator Kirsten Gillibrand, a Democrat from New York, who had called his plan to slow delivery “wrong.”

But on Monday, Gillibrand praised the pilot, highlighting the opportunity to both help low-income Americans as well as bolster the U.S. Postal Service’s financial health.  

USPS slows down some deliveries 02:21

“This pilot program is a great first step towards creating a full postal bank,” Gillibrand wrote on Twitter. “Families who don’t have access to a bank will be able to cash paychecks without paying predatory fees. And it would generate billions to help the @USPS survive and thrive.”

Payroll and business checks

The USPS pilot allows customers to use payroll and business checks to purchase gift cards, and is aimed at providing an alternative to traditional check cashing, the USPS spokeswoman said. The gift cards have a limit of $500, and checks larger than $500 won’t be accepted, she added. 

To be sure, that dollar limit means the check-cashing service is likely most useful to low-income workers or those who have small business checks they want to convert into a gift card. But the USPS may expand the pilot to include more financial services, such as bill-paying services and ATMs, the Washington Post reported

Adding financial services to the USPS isn’t a new idea. In April, Gillibrand and other lawmakers including Senator Bernie Sanders, an Independent from Vermont, urged Congress to create banking pilot programs for the USPS. They cited the need for affordable banking services for low-income Americans, who are more likely to be unbanked and therefore rely on expensive or predatory services such as payday lenders.

About 7 million Americans are unbanked, meaning that no one in their household has a checking or savings account at a bank or credit union, the FDIC found in 2019. 

In 2014, a white paper from the USPS’ Office of Inspector General examined the potential of adding banking services to the nation’s sprawling network of postal branches. That study forecast that adding financial services could bring an additional $1.1 billion in annual revenue to the agency. 

The postal agency has a historic footprint in financial services. The Postal Savings System was created in 1910 as a way to convince people not to hide their money and to help immigrants who were used to tapping their countries’ postal agencies for banking services, according to the USPS. But that system ended in the late 1960s.