What Is a Passbook Savings Account?

A passbook savings account is the classic name for a traditional savings account. Though it may seem quaint now, tellers record the deposits, withdrawals, and interest earned for account holders in a small physical booklet called a passbook.

Today, apps and digital banking have made passbook accounts largely obsolete. Passbook savings accounts still exist, but they are offered by relatively few banks and are rarely promoted even where they remain an option. In general, the accounts are now more commonly associated with savings accounts for children, though they may appeal to other types of customers as well.

How Do Passbook Savings Accounts Work?

Passbook savings accounts work the way a lot of banking used to function.

When the account was opened, the depositor was issued a passbook. Bank tellers recorded deposits along with earned interest in these paper notebooks, which the depositor kept at home for safekeeping. While the digitization of so much personal banking has pushed passbooks to the edge of obsolescence, they’re still an enjoyable way to save for some.

Passbooks haven’t changed much with time. Banks may require you to visit a branch in person in order to use them, given the books’ analogue nature. There’s also generally no ATM access available with this type of savings account, although you may be able to look at your balance online.

Passbook Savings Account Rate of Return

Passbook savings accounts offer rates of return that are usually lower than the ones attached to other savings accounts. On average, interest rates sit at around 0.09%.

The reasoning for this is simple: from a bank’s standpoint, these accounts are expensive to maintain. Besides paying for the passbooks, the banks also have to pay for the machines that tellers use to transfer electronic data into the passbooks.

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Rachel Siegel, CFA
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