Here’s a great idea — use neighborhood post offices to provide some banking services and offer a safe way to pay bills and get money to people who don’t always have access to a bank, or don’t have good enough credit for a credit card, .
The Inspector General of the Postal Service, David Williams, made the pitch in a report in late January. It was essentially overlooked until Massachusetts Senator Elizabeth Warren (D) endorsed the concept.
Basically, the proposal is an effort to use neighborhood post offices, make money for the Postal Service and help 68 million people in more than a quarter of American households who don’t have bank accounts, or credit cards.
This could be a big boon for people who don’t have traditional banking relationships, and resort to payday and title loans to get quick cash to pay bills.
HOW IT WOULD WORK
Inspector General Williams proposes a Postal Card that would allow you to do the following:
Make mobile and online purchases
Put cash on a card
Pay bills online
Withdraw money at ATMs
Transfer money internationally
Get small loans
The Postal Card would be similar to a bank card. You could load your paycheck on it, withdraw cash, pay bills, receive or make tax payments and send money internationally.
PAYDAY LOAN ALTERNATIVE
The card could also be used as a payday loan alternative. Inspector General Williams suggests, “People could borrow up to 50 percent of their gross paycheck. For a person who earns $18,000 per year and gets paid twice a month, that is $375. Every borrower could be required to pay a minimum of 5 percent of their gross pay from each paycheck until the loan is paid off. In this scenario, that would be $38 from each paycheck.”
The Postal Service would automatically withhold loan payments from borrowers’ paychecks before putting the difference on their Postal Card.
If the Postal Service charged a $25 upfront loan fee and a 25 percent interest rate, the borrower would pay off the loan in 5 1⁄2 months, paying a total of $48 in interest and fees across the life of the loan.
That’s a big difference from a traditional payday loan. If you were to borrow $375 in a payday loan you’d pay $520.
To make this happen, the Postal Service wouldn’t go it alone. It would partner with banks, and the deposits would be covered by the FDIC.
Right now, this is just an idea. We’re waiting to see how it can become reality.