Stamp Price Increase — Why the Change in Postage Prices?

Posted on January 29, 2014May 20, 2014 by Postmaster

Wait! Didn’t the price of a first class stamp increase about, oh, five minutes ago? So why has the Postal Service announced yet another stamp cost increase?

If it seems postal rates increase every year, you’re right. On January 26th, the cost of a first class stamp went from 46 to 49 cents. This 3 cent rate hike in the price of a stamp is the Postal Service’s largest in more than a decade. Last year’s increase was by only 1 cent. It is now more expensive to mail a postcard as well, though that fee has only increased by a penny, to 34 cents.

Clearly, the mailing public didn’t make this decision. The Postal Service has been asking for a larger price hike for about three years now. Requests for these increases must go through the agency’s watchdog, the Postal Regulatory Commission (PRC). And the PRC is a tough overseer: they turned down the Postal Service’s 2010 request for an abnormal rate increase, claiming that they didn’t provide sufficient evidence of financial hardship. And the Postal Service was persistent — they then filed an appeal with the U.S. Court of Appeals, which agreed with the PRC and turned it down.

For this go round, the Postal Service presented evidence claiming that the agency had a loss of $22 billion between the years of 2008 and 2012. They also estimated a loss of $44 billion for the period between 2013 and 2014. The PRC uses a different calculation method than the Postal Service, however, and their grand profit loss total came in at just under $3 billion…

Therefore, they’re finally allowing the Postal Service to make only this amount in profits over the next eighteen months using higher than normal pricing. The Postal Service, which is hoping to keep this large rate hike permanent (the PRC says no, although this doesn’t mean postal rates will go down) is in the process of appealing the PRC’s decision to allow permanent increased rates.

So what did the PRC decide justified a stamp price increase at all? There are four main factors in their order granting the increase and they include losses suffered due to the economy, legal ramifications, the typical rate hike according to inflation and business risks around the USPS’s ability to operate.

Losses Due to the Great Recession and E-mail

The PRC agreed with the USPS that the recession was to blame for some profit losses in shipping, mailing letters, and doing business by mail; but they also blamed “electronic diversion” for much of the agency’s losses. This term refers to doing business over the Internet, e-mailing, etc. You should have seen this coming folks, and you didn’t, the PRC told the Postal Service. This reasoning plays a part in why the PRC thinks the Postal Service has lost much less money than they’re claiming.

The Stamp Price Increase Meets Legal Guidelines

Legally, the Postal Service’s rates are not permitted to rise at a greater rate than that of inflation and the PRC is required to enforce that. However, if the Postal Service can provide evidence of extreme financial hardship if capped by inflation, than this legal rule can be suspended (although this is somewhat debatable). The Postal Regulatory Commission says they have been provided with enough justification by the USPS to use this loophole. This is why they’re calling it an “exigent” rate hike.

Prices Can Go Up with Inflation Too

Despite all these mailing increases, the Postal Service actually hasn’t been keeping up with inflation over the years, so the decision issued by the PRC allows for an additional bump in price by 1.7%, just to keep up with inflation. This blends with the “exigent” part of the hike for a grand total of a roughly 7% increase.

USPS Services Were at Risk

In the PRC’s December decision, it was stated that the Postal Service “lacks a sufficient level of liquidity”(money) to provide services (like delivering packages and letters), and that the inflation-based rate alone will not be sufficient to finance operations. Because the USPS could show that their basic services were at risk, the PRC could justify a larger increase.

The PSRC will be reviewing this case to determine the fate of the exigent hike in May. In a strange twist in events, it’s possible that the price of a stamp will go down. Stay tuned…

Stamp Price Increase — Save on Postage by Buying Stamps This Week

Posted on January 17, 2014January 21, 2014 by Postmaster

While I’m not one to dole out financial advice (and neither is this blog), there’s one investment you should probably make in the next 7 days unless you’d like to address all your bills, thank you notes and wedding invitations to Ripoffsville this year. The price of a stamp is about to skyrocket on Sunday, January 26th and your best way around it is to invest in some Forever stamps before the postage increase.

What do I mean by “skyrocket”? Ultimately, the price of a stamp is only going up by 3-cents… from 46 cents to 49 cents. Doesn’t seem like a big deal, right? Well, percentage-wise, this is a 7% stamp price increase! By buying Forever stamps, you’d save 6 percent! …You still don’t seem persuaded. I get it… It’s barely even as good as a Bed, Bath and Beyond coupon.

Let’s look at it this way: historically, the price of a stamp has barely even kept pace with inflation — so, in a way, first class letter postage has actually gotten cheaper and cheaper each year. For instance, a 32 cent stamp in 1995, adjusted for inflation, would have been worth worth 49 cents in 2013. By comparison, this makes our actual 2013 rate, 46 cents, look like a bargain. And this historical pattern of inexpensive postage has persisted for quite a long time. In fact, something called the Postal Accountability and Enhancement Act of 2006 was supposed to force the USPS to raise stamp prices no faster than the rate of inflation. Forever stamps should never be a good deal, because legally speaking, stamp price increases should never exceed inflation.

Counter to all this, the USPS filed a request for an “exigent” price increase (by complaining about the Great Recession) and it was approved by the Postal Regulatory Commission. So, now the price of a stamp is actually bumping up to a full 49 cents — an increase of 6.5% — clearly higher than the rate of inflation. Inflation over the course of 2014 (which we can assume will be at least 1%) will remove the purchasing power of your postage budget as the year wears on. These economics will finally make this stamp price hike a bad one for consumers.

TL;DR: Buy some Forever stamps this weekend and thank me at the end of the year when you’re sending Christmas cards at a 6% discount. If not for the sake of beating the system, saving one more trip to post office hell will easily pay for many more stamps.

2014 Stamp Price — How Much is it Going Up? When’s the Change?

Posted on January 14, 2014January 13, 2014 by Postmaster

If you’re following USPS news and the price of a stamp closely, you’d know that the first class rate for postage stamps is rising this year. But even the Postal Service is making it hard to answer the two most fundamental questions: By how much is the price of a stamp increasing? And when is this all happening?

The simplest answer is: 49 cents and January 26th, 2014. That’s not all — so read on.

The Stamp Price Increase

The new price for a first class stamp will be 49 cents. That’s a never-before-seen 6% increase to the old price which was only 46 cents. It might not seem like that much of a hike but for a rate that businesses depend on, it’s huge. If the USPS were following the convention typically enforced by the Postal Regulatory Commission, the price would only go up by 1 cent. The real change is 3 cents. So, relative to expectations, the new price is a 300% rate surprise!

Forever stamps will increase in value when the price of a stamp changes this year.

Don’t forget that the USPS has already helped us deal with its constant price changes by selling Forever stamps. If you own Forever stamps (or buy them before the price changes!), their value will automatically rise with the price increase. However, if you go to the post office even just the day after the price increase to buy Forever stamps, you’ll pay the new price of a stamp: 49 cents.

When the Price Changes

The price of a stamp increases to 49 cents on Jan. 26th, 2014 according to the USPS, but what does that really mean? Jan. 26 is a Sunday — very few corner mailboxes are serviced on Sundays and nearly every single post office is closed. The postal service doesn’t even deliver mail on Sundays.

The USPS’s wording suggests that the new 49-cent price takes effect on January 26th, so we can assume that the actual change takes place at midnight or close-of-business on Saturday, Jan. 25th. In other words, if you drop something in the mail on or after Jan. 26th, you should plan to apply postage valued at the new price: 49 cents. Or, if you buy stamps at a kiosk or at a post office that’s open on Sunday, you’ll get charged the new price of a stamp.

However, we know from past price increases that the USPS permits a very unofficial “grace period” where it will continue to deliver mail stamped for the old postage price. If you’re lucky, this will last all day Sunday, Jan. 26th. On Monday, Jan. 27th, be sure that all of your mail has 49 cents of postage attached or it might be returned or discarded.

Stamp Price Increase in 2014 — Going Up at Unprecedented Rate

Posted on December 26, 2013December 27, 2013 by Postmaster

On Christmas Eve, the Postal Regulatory Committee (PRC) officially approved an unprecedented increase to the price of a stamp — a full 3-cent increase — to take hold at the end of January 2014. This will bring the total price of a first class stamp to 49 cents from the current rate of 46 cents. The official change takes place on January 26th.

Three cents may not seem like a lot but this is a 6 percent increase to the price of a stamp which is unprecedented.

The USPS is not ordinarily permitted to increase its prices beyond the rate of inflation. The ordinary price restrictions would have only raised prices by 1.7 percent — only enough to add one cent to the price of a stamp. Although a 3-cent increase sounds like nothing, the rate increase that the PRC approved comes to about 6 percent price hike which is unprecedented in USPS history… and an increase like that can have a real impact on businesses that depend on mailing letters.

The PRC made clear that this is a temporary increase to the price of a stamp and that it may only last 2 years although they did not outline a plan or guidelines for how the USPS will reverse the new rate. Instead they place the onus on the USPS to “report quarterly on revenues generated by the rate increases” and to come up with their own schedule to “phase out the rates once they have produced the revenue justified by their request.” Since the 1-cent portion of the price hike was in line with inflation, only 2 cents worth of the price increase will have to be rolled back.

The USPS has been suffering for a variety of reasons — from technology to inefficiencies in how it operates — however the regulatory committee that approved the USPS’s stamp price increase blamed the Great Recession for what they’ve been calling an “exigent” price hike. The agency believes that the financial harm caused to the USPS during the recession is an extenuating circumstance that justifies an extreme price increase.