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A Guide to Passbook Savings Accounts

A Guide to Passbook Savings Accounts
Jacqueline DeMarco
Jacqueline DeMarcoUpdated June 1, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Saving money is an essential habit that can help you achieve your financial goals. A passbook savings account can help you start — and stick — to that habit by giving you a booklet that tracks your deposits, withdrawals, and balances as you go. While these accounts aren’t as common as they used to be, you can still find passbook savings accounts at some banks and credit unions. Read on for a closer look at how passbook accounts work, their advantages and disadvantages, who should consider getting one, and where to find them.

What Is a Passbook Savings Account?

Passbook savings accounts are an old-school type of savings account that was common before the rise of automated and online banking. These accounts come with a booklet (called a passbook) that serves as a detailed record of transactions, including deposits, withdrawals, and interest earned. Typically, the teller stamps the passbook every time you make a transaction so you know exactly what you have in the bank. The concept is similar to how many people use their checking accounts, logging each transaction in the checkbook register.With the rise of online banking and mobile apps that allow you to deposit checks, transfer money, and check your balances 24/7, passbook savings accounts aren’t as popular as they once were. However, you can still find this type of savings account, and it can be a good choice for a young person just getting started with saving and/or someone who prefers banking in person to banking online. 

How Does a Savings Account With Passbook Work?

A passbook savings account works in a similar way to a regular or online savings account. Your deposits earn interest, typically expressed as an annual percentage yield (APY). The higher the APY, the faster your money will grow.In addition, the money you keep in a deposit savings account is insured up to $250,000 per depositor, per institution, by the Federal Deposit Insurance Corporation (FDIC) insurance at a bank or the National Credit Union Administration (NCUA) at a credit union. This means you can’t lose your money (up to the insured limits) even if the bank or credit union were to go belly up. Like other savings accounts, you may be limited to a certain number of withdrawals (often six or nine) per month from a passbook account. While the federal rules limiting savings accounts to six withdrawals per month were lifted in April 2020, many banks and credit unions have kept restrictions in place and will charge a fee if you exceed the stated limit. Unlike a regular savings account, however, you’ll receive a passbook when you open a passbook savings account. You typically need to present the passbook whenever you make a transaction, such as depositing or withdrawing money. These accounts usually limit you to in-person deposits and withdrawals, though some institutions will allow you to check your balance online.

Advantages of Passbook Savings Accounts

Passbook savings accounts come with some distinct advantages over regular savings accounts. These include:
  • Easy recordkeeping Passbook savings accounts are simple to manage. Because the process of logging deposits and withdrawals is so rigid, these accounts offer a great way to stay organized. 
  • No minimum balance requirements Some passbook savings accounts do not have minimum balance requirements, allowing individuals to start saving with any amount of money.
  • Financial discipline The passbook allows you to easily see and track your savings progress, which can encourage you to keep saving towards your goals. Having less access to your money can also help you resist the temptation to spend.

Disadvantages of Passbook Savings Accounts

There are also some disadvantages that come with passbook savings accounts that consumers need to be aware of before opening one of these accounts. These include:
  • Only allows in-person transactions Passbook savings accounts generally require you to make all of your deposits and withdrawals in person. You typically can’t make electronic transfers or set up direct deposit for your paycheck.
  • Lower interest rates Passbook savings accounts tend to offer lower interest rates compared to other types of savings accounts, such as high-yield savings accounts.
  • Outdated technology In an increasingly digital world, passbook savings accounts may feel outdated, lacking the convenience and features of modern online banking platforms.

Who Should Get a Passbook Savings Account?

A passbook savings account can be a good fit for someone who prefers a tangible record of their savings and enjoys the discipline of only being able to take money out of savings by going into the bank. These accounts can be especially beneficial for those who are starting their savings journey or have specific savings goals in mind. They can also be a great starter account to teach children about the value of saving money in a hands-on way. However, individuals who prioritize online banking convenience, higher interest rates, and advanced account management features may find that other types of savings accounts will better fit their needs.

Where Can I Find a Passbook Savings Account?

While passbook savings accounts are harder to come by these days, they are offered by various banks and credit unions. You’re most likely to find this type of account at a local community bank or credit union. The large, national banks typically don’t offer passbook savings accounts.

The Takeaway

Passbook savings accounts offer a traditional and tangible way to save money. They provide a physical record of transactions and can promote financial discipline. This type of account can be a good choice for those who prefer to bank in person and keep a physical record of their transactions and financial history. They can also work well for parents looking to teach their children about financial and savings basics, since the physical book can serve as a great learning tool. However, these accounts generally come with limitations, such as restricted access and lower interest rates. If your priority is getting the best possible return on your savings, you may be better off getting a high-yield savings account. These accounts can earn as much as 25 times the average rate on standard savings accounts.If you’re interested in exploring your savings account options, Lantern by SoFi can help. With our online banking marketplace, it’s easy to compare high-yield savings accounts based on APY, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

Do any banks still have passbook accounts?
Why do people still use passbook accounts?
Are passbook savings taxed?
Photo credit: iStock/Nattakorn Maneerat

About the Author

Jacqueline DeMarco

Jacqueline DeMarco

Jacqueline DeMarco is a personal finance writer and editor based in Southern California. While she spends the bulk of her time writing about complex financial issues, she also tackles a variety of subjects ranging from food to fashion to travel. Her work can be found across dozens of publications such as Credit Karma, LendingTree, Northwestern Mutual, The Everygirl, and Apartment Therapy.
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