1910-1933 <|> Before FDIC
An Act of Congress of June 25, 1910, established the Postal Savings System in designated Post Offices.
The law directed the Post Office Department to redeposit most of the money in the system in local banks, where it earned 2.5 percent interest. The Postal Savings System paid 2 percent interest per year on deposits. The half percent difference in interest was intended to pay for the operation of the system.
The initial maximum allowable balance of $500 was raised to $1,000 in 1916 and to $2,500 in 1918. The initial minimum deposit was one dollar. In order to save smaller amounts for deposit, customers could purchase a 10-cent postal savings card and 10-cent postal savings stamps to fill it.
Initially certificates of deposit were issued in denominations of $1, $2, $5, $10, $20, $50, and $100. Until May 1916, there was a monthly deposit cap of $100.
From July 1, 1911, to July 1, 1935, Postal Savings System deposits could be exchanged in amounts of $20 or more for postal savings bonds, which yielded 2.5 percent interest.
Beginning in July 1917, certificates were also issued in the amounts of $200 and $500.
Deposits were slow at first, but by 1929, $153 million was on deposit.
1933-1984 <|> FDIC to the End
After July 1, 1935, customers could purchase U.S. savings bonds in lieu of postal savings bonds.
Beginning in 1940, postal savings stamps were also issued in 25-cent, 50-cent, and 1-dollar denominations.
In 1941, a 5-dollar denomination was added, and while still redeemable for certificates of deposit, the stamps were meant to be pasted into booklets which were redeemable for United States Treasury Defense savings bonds.
Savings spurted to $1.2 billion during the 1930s and jumped again during World War II, peaking in 1947 at almost $3.4 billion, with more than four million depositors using 8,141 postal units.
Postal Savings System certificate of deposit, 1954 series After World War II, goods became available to meet pent-up consumer demand, banks raised their interest rates to two percent or higher and offered the same government guarantee as the Postal Savings System, and savings bonds provided a higher rate of interest.
Beginning September 1, 1954, when new punchcard-style certificates were issued, $1,000 and $2,500 denominations were added, and the $2 denomination was dropped.
Interest was compounded annually on all certificates issued on or after September 1, 1954, although simple interest continued to be paid on certificates issued before that date.
The $1 denomination was dropped in August 1956, when the minimum deposit was raised to $5.
Deposits in the Postal Savings System declined, dropping to $416 million by 1964.
On April 27, 1966, the Post Office Department stopped accepting deposits to existing accounts, refused to open new accounts, and cut off interest payments as the yearly anniversary date of existing accounts came up.
When the Postal Savings System ended officially on July 1, 1967, about $50 million in unclaimed deposits of more than 600,000 depositors was turned over to the Treasury Department to be held in trust indefinitely.
Postmasters began closing accounts in September 1968, and by June 1969 all account records had been sent to the Treasury Department.
An Act of August 13, 1971, authorized the Treasury to turn over the money on deposit to various states and jurisdictions, each sharing proportionally based on its own deposits. Some $9 million were distributed that year.
Under the Postal Savings System Statute of Limitations Act of July 13, 1984 (Public Law 98-359), no claims could be brought more than one year from the date of the enactment. The statute of limitations applies only to certificates. Postal savings stamps and postal savings bonds can still be redeemed.
"Postal Savings System" HISTORIAN, UNITED STATES POSTAL SERVICE - JULY 2008