Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Why The Post Office's Money Woes Could Hurt Your Credit Score

The United States Postal Service can't pay its bills, and that could affect your credit rating.

How is that possible, you ask?

Our 21st century lives have hit the Postal Service hard. Look at it this way. Every time you hit the send button, the service loses 45 cents. Dave Partenheimer, a service spokesman, adds that online banking has also impacted the operation.

But the convenience of our smartphones, iPads and laptops may actually make things a little less convenient for us when it comes to snail mail. And worse than that, our credit scores could be impacted.

On August 1, 2012, the Postal Service was forced to default on a $5.5 billion payment for retiree health benefits. And unless Congress grants the ability to trim costs in various ways, the USPS expects to default on a second payment of $5.6 billion due by September 30.

But the USPS has a plan, and it's trying to convince Congress that it has the answer. The only problem is, its answer may not suit your wallet.

So what's the USPS' solution? Cut back on Saturday service. By trimming back delivery days, the operation can save about $2.7 billion a year.

"Under our plan, post offices would remain open on Saturdays, customers that have P.O. boxes would still get their mail on Saturdays and there would continue to be Express Mail delivery seven days a week," Partenheimer said.

Saturday was chosen because it has the lowest volume of mail delivered, he said.

But while it will save the post office some cash, one fewer day of mail service could have the inadvertent effect of putting a dent in your credit score if you're not prepared. Subtract a delivery day, and it's possible that payments sent through the mail could arrive late. Late payments get reported to credit bureaus, and there goes your pristine credit.

Consumers will have to think ahead about dropping payments in the mail early. One less day of mail delivery and residential mailbox pick-up also could lead to late fees for consumers until they get used to allowing extra time for a payment to arrive.

Ironically, as the operation considers a solution that could ultimately affect your credit rating, it also sees salvation in the increase of credit card pitches dropped in your mailbox.

Hope for sustaining the USPS isn't where you might expect to find it. In this case, salvation may come in the form of a double-edge sword, at once a hero and a nuisance.

There's no getting around the fact that junk mail, the stuff you likely recycle as soon as it hits your mailbox, is big business. And it could help provide a bailout.

Partenheimer said first-class mail is the USPS's most profitable service, but junk mail -- known officially as direct mail -- is an important revenue source. It accounted for 87.4 billion pieces of mail in 2011, which added up to $17.8 billion of the service's $66 billion in revenue. To take advantage of merchants’ increased interest in targeted marketing, the Postal Service introduced "Every Door Direct Mail."

According to the Direct Marketing Association, a company that represents about 80% of the advertising mail that finds its way to your mailbox, direct advertising mail and catalogs account for more than $642 billion in U.S. sales.

"The average household sifts through 41 pounds of junk mail annually, sending most to the circular file," said Sander DeVries, cofounder of 41 Pounds, a Michigan-based nonprofit organization working to reduce the environmental impact of junk mail.

With some types of advertising mail, the USPS receives a fee for supplying addresses within a certain area. You can't be removed from this mailing list because in order to offer the lowest bulk mail rate, the USPS has to deliver to 100% of the addresses on the route.

Besides being bothersome in the way unsolicited materials can be, junk mail can be harmful.

"If offers for credit cards or other financial services are tossed in the trash, you could be at risk for ID theft because these offers contain your name and address," said CPA Marsha Baker, a professor of personal finance at Lindenwood University in St. Charles, Mo.

With that in mind, the best way to dispose of junk mail is shredding it.

The Investing Answer: Want to cut the amount of junk that might find its way to identity thieves? Laws require direct ad mail that’s addressed specifically to you provide a way to opt out of receiving more offers, so you can contact those advertisers directly. Here are other ways to clean up the clutter:

  • ADVO, Inc. -- Call (888) 241-6760 or complete this form for fewer discount club ads and random trial samples in your mailbox.
  • Catalogs -- Visit Catalog Choice to opt out of catalogs, coupons and more.
  • Credit bureaus --Cut out credit card and other financial offers by contacting Equifax, Experian and TransUnion to request they no longer release your information.
  • Direct Marketing Association -- Visit DMAchoice online to opt out of all their offers entirely or choose which nonprofits, catalogs, magazines and discount clubs you want to hear from.
  • Do Not Mail Registry -- An online petition clamoring to end junk mail.
  • Val-Pak -- Stop receiving the blue envelope full of coupons and other offers by filling out the Cox Target Media: Mailing Removal Request Form.

Don't expect instant results. Lists are rented, shared and sold weeks -- in some case months -- ahead of when a mailing might be generated. So you'll likely receive direct ad mail two to three months after plastering your name on every imaginable "do not mail" list.