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What are Service Certificates?

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  • Written By: Paul Woods
  • Edited By: Jacob Harkins
  • Last Modified Date: 07 December 2016
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Services certificates are a type of bond issued by the United States government to American veterans of World War I. The certificates were designed to be a bonus payment to veterans making up the difference between military pay and what the veterans would have earned in the private sector had they not served. Issued in 1925, the 20-year service certificates were to have matured in 1945, but the U.S. Congress allowed redemption 10 years earlier because of the economic hardships of the Great Depression and for political reasons.

Before issuing the 1925 service certificates, it was a tradition in the U.S. for veterans to receive some kind of bonus to compensate for the lost opportunity at higher wages brought on by military service. For conflicts fought by U.S. armies up to the Spanish-American War, the bonus was land and money. There was no bonus for the Spanish-American War, and World War I veterans initially received only a $60 US Dollar (USD) bonus. This was a politically unpopular move that sparked the formation of the American Legion, a veterans’ rights organization; and ultimately was resolved with the creation by Congress of the service certificates.

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The bonus included in the service certificates was $1 USD per day of service, with an additional 25 cents per day for overseas service. Domestic service bonuses were capped at $500 USD, $600 USD for foreign service. The certificates could be redeemed after 20 years, or in 1945, unless they were for an amount of $50 USD or below, in which case they were paid out right away.

Congress issued about $3.6 billion USD in face value of service certificates funded by 20 annual payments of $112 million USD plus interest. Initial terms of the service certificates allowed the holder to borrow up to 25 percent of the certificate’s face value. That amount was raised to 50 percent in 1931 because of widespread joblessness during the depression.

In 1932, to protest the economic hardships and demand immediate redemption of the service certificates, about 17,000 veterans, family members and supporters marched on Washington, D.C., and set up a tent city. Protestors were called the Bonus Army. The people, their tents and possessions were forcibly removed by the U.S. military.

By 1933, the marchers were back still demanding immediate, full redemption of the service certificates. Many veterans were enticed to join a government job program working on a new highway in Florida. When a hurricane hit that project killing hundreds of veterans, a public outcry led to Congress overriding a presidential veto and redeeming the service certificates at face value 10 years early.

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