The Payments System is Changing [Again]
People have new ways to get bills and statements and to make payments. Online services have drastically reduced mail volume, especially for payments, but billions of transactions are still in the mail. You know about these transactions in the mail if you have had any major life changes. Purchased a house? Bought a car? Had to deal with a will and an estate? There are so many parts of our lives that still require a mail transaction – sending that official signature. This is not a major part of your life, but these transactions are part of major changes in your life.
Money in Early America
Sending money through the mail was just not done in colonial times. While different colonies might all use money termed “pounds, shillings and pence,” rates were not standardized. South Carolina pounds and New York pounds were no more the same than American and Canadian dollars. In 1799 legislation required all accounts to be kept in dollars or smaller units of such but the law was fluidly enforced, and as Ron Michener noted in “Money in the American Colonies,” as late as the 1820s some tavern keepers in East Jersey were still using New York currency.
There were few banks, but dozens of different types of currencies in use. Spanish and French coins were in use, alongside English money (foreign coins were not banned as legal tender in the nation until 1857). States and cities might have their own script as well. Through the first half of the 19th century paper money was issued by private banks, not the government. When the National Banking Act was passed, about 8,000 entities issued currency notes, to varying degrees of reliability. The Treasury Department issued Demand Notes (nicknamed greenbacks due to their color) to help finance the Civil War.
Money in the Mail
The idea of making a financial transaction by mail was, until the Civil War, left to bankers and governments. For average individuals, financial transactions stayed in the face-to-face range. For one thing, coins were the common currency at first, and they certainly could not be sent by mail since postage rates were too high for most people already without adding the weight of coins (or the fear of theft as the weight would easily give any letter away at a time when mail was not delivered to individuals, but left at a common location for retrieval).
The establishment of Registered Mail in 1855 helped provide extra security (for a fee) for pieces of mail. Registered Mail was a boon to businesses, providing not only accountability (each time a registered mail piece changed hands, the postal employee taking charge had to sign for it), but extra security (registered mail bags had special locks). But the real revolution in allowing people to move money by mail came in 1864 with the creation of the Money Order system. That year the Post Office Department addressed people’s fear of mail theft by establishing a financial transaction that was created, as the act stated, to “promote public convenience, and to insure greater security in the transfer of money through the United States mails.” People who wanted to send money to friends or family by mail purchased a paper voucher at their local post office for an amount $30 or less, then mailed that voucher to the recipient, who turned it into his or her local post office for cash. The new system beat using express services to send money in envelopes that were sewn shut and sealed with wax. At first, only 141 post offices were able to issue money orders, but the system’s popularity led the Post Office to provide the equipment to more and more offices. Money Orders became especially popular with the nation’s growing immigrant population, and by the end of the 20th century the New York City post office led the nation in money orders purchased. By 1890 the total value of money orders issued across the U.S. had grown to over $110 million a year.
The Post Office Department handled people’s money outside of the mail as well. In 1911 the Department instituted the Postal Savings system, allowing individuals to use their local Post Offices as savings institutions. Millions of dollars were entrusted to postal hands until the system was shut down in in 1966. In 1913, following the creation of the instantly successful Parcel Post system, the Department allowed people to pay their carriers or postal clerks for packages through the Collect on Delivery program.
The Check’s in the Mail
The idea of writing a check to cover a debt started to become more common for people after the war, but began to hit their stride after the creation of the Federal Reserve Act of 1913. Checks began to find their way into the mail to pay bills, mortgages and other debts, and of course as birthday and holiday gifts. Businesses and banks used the mails for checks as well, including the concept of “clearinghouses” which was the cornerstone of the national bank checking system, allowing banks to exchange checks with each other.
The second half of the 20th century brought dramatic changes in society and finance. Among these was the increasing number of women joining the work force, the creation of a new form of payment – the credit card, and the use of toll-free phone numbers by marketers eager to capitalize on these changes. As the nation’s social and financial dealings evolved, the postal system remained a reliable and secure service for receiving and paying bills and helping marketers share products with consumers through catalogs.