Service Certificates

What are Service Certificates?

Service certificates are like bonds in that they had a face value and guaranteed payment, including compound interest, to eligible World War I veterans at the maturity date.

Understanding Service Certificates

Congress passed the World War Adjusted Compensation Act of 1924, which conceded service certificates to veterans of World War I. These service certificates were like a life insurance benefit. Each had a face value and guaranteed payment at maturity, including compound interest. Officially known as Adjusted Service Certificates, they matured in 20 years, which in this case was 1945. Veterans were qualified for $1.00 for every day of home service and $1.25 for every day of overseas service. The face value of the certificates were capped at $500 for any vet who served locally and $625 for the people who served abroad.

The long-term maturity date of these service certificates introduced issues for holders and the U.S. government. During the 1930s, amidst the Great Depression, war veterans needed funds and fought to demand immediate cash payment of the service certificates. Huge number of war veterans and their families, known as the "Bonus' Army," walked to Washington D.C. to convince Congress to climb the date of maturity of these certificates.

However this walk initially failed to speed up the payments, Congress in 1936 passed a bill permitting veterans to collect the service certificate payment. The Adjusted Compensation Payment Act accommodated the immediate payment of the face value of service certificates minus outstanding loans and unpaid interest. The Act supplanted the service certificates with non-negotiable however immediately redeemable service bonds issued by the Treasury Department in categories of $50, with odd sums between $50 multiples paid with a money order. For instance, in the event that a veteran was to receive $1,172 on his service certificate, he was paid 23 $50 service bonds and written a check for the $22 difference. These bonds are officially alluded to as Adjusted Service Bonds.

The bonus bonds paid interest at 3% annual interest rate, higher than the 2.5% interest rates on bank savings accounts. Albeit the service bonds couldn't be sold, they could be recovered with the Treasury for cash whenever after June 15, 1936. While the veterans had the option of holding the bonds until their maturity date in 1945, most veterans cashed in very quickly. In the initial two weeks of June 1936, veterans cashed in 46% of their total bonus.

The cash payments comprised an efficient economic stimulus. Since the program required little government administration, the money paid to veterans was probably going to be spent immediately, and the whole cycle didn't need the long lead season of a public works program.

Features

• Service certificates were allowed to WWI veterans under the World War Adjusted Compensation Act of 1924.
• Service certificates are like bonds in that they had a face value and guaranteed payment, including compound interest, to eligible WWI veterans at the maturity date.
• Service certificates, officially known as Adjusted Service Certificates, matured in 20 years.