With the rise of online banking, relying on physical records of our payments and transactions has become less common. Besides banking apps and electronic payment systems, many banks also offer online savings accounts, allowing you to keep your funds safe without ever visiting a bank in person. Still, many people prefer going to the bank to deposit and withdraw funds and keeping physical copies of financial records since this gives them more control over their funds.
If you’re among those who favor hands-on banking over digital accounts, a passbook savings account may be a good choice for you. In this guide, we’ll explain what passbook savings accounts are, how they work, and how much interest they pay. We’ll also reveal the main advantages and disadvantages of these accounts and provide some worthy alternatives.
What Is a Passbook Savings Account?
A passbook savings account provides you with a passbook—a physical booklet the size of a U.S. passport that serves as a record of your deposits, withdrawals, and balances. Essentially, you use it to document all the payment details that are otherwise digitally stored.
These accounts largely differ from most available money-saving options because they require you to visit your bank to make transactions. Still, they share some similarities with regular savings accounts because they:
- Include an FDIC insurance of up to $250,000 per depositor
- Allow you to earn interest on the money in your account
- May have transaction limits and service fees
While passbook savings accounts aren’t as popular as they used to be due to the more convenient online banking options, they still exist in various banks across the U.S. Some may even let you open an account for your child or grandchild.
How Do Passbook Savings Accounts Work?
When you open a passbook savings account, you get a notebook—called a passbook—and use it to track your transactions. To fund your account, you can deposit cash and checks or transfer funds from a checking account.
If you want to withdraw or deposit funds in a passbook account, you have to visit your bank in person and record your transactions in the passbook after the bank verifies them. While banks used to stamp passbooks as proof of transaction approval, they now typically keep electronic passbook history records and often use a special printer to copy the transaction information directly into your passbook.
These accounts don’t allow you to use a physical card to make withdrawals or payments, meaning you can’t withdraw funds from an ATM either.
What Are the Passbook Savings Account Rates of Return?
Most passbook accounts allow you to earn interest on your savings, but the return rates they offer depend on your financial institution and account balance. Still, a passbook savings account’s rate of return can’t compare to the rates offered by, for example, a high-yield savings account (HYSA). While HYSAs often pay an annual percentage yield (APY) of 5% or higher, passbook accounts typically earn less than 2% APY.
Which Banks Offer Passbook Savings Accounts?
Opening an account often requires a minimum deposit, which ranges between $1 and $500 and may include maintenance fees. Here are several banks that currently offer a passbook savings account:
- Cathay Bank—Requires a minimum opening deposit of $100 and has a minimum daily balance requirement of $500
- Spencer Savings Banks—Imposes a $100 minimum opening deposit but charges no monthly service fees
- State Bank of Toulon—Has a $50 minimum opening deposit limit
- First National Bank—Includes a $10 minimum balance to open an account and a monthly minimum balance requirement of $100
- Middlesex Savings Bank—Requires a minimum deposit of $1.00 to open an account
The fees for failing to meet the bank’s requirements vary depending on the financial institution, and some don’t include fees at all. Still, the fees rarely exceed $5.
Pros and Cons of Passbook Savings Accounts
Like all savings accounts, passbook accounts come with several advantages and disadvantages. Here are the main ones:
| Pros of a Passbook Savings Account | Cons of a Passbook Savings Account |
| Lets you keep physical records of your transactions to facilitate budgeting and tracking your spending Includes low or no maintenance fees Has relatively low minimum balance requirements Can help you decrease impulse purchases as it requires you to visit the banks for withdrawals Is a useful financial vehicle to teach children money management | Only available at a small number of banks and credit unions Has lower rates of return than high-yield savings accounts or investments like stocks Includes the risk of loss since it’s a physical passbook Doesn’t offer a debit card or allow you to withdraw cash from an ATM Lacks important security elements such as protection against fraud |
Alternatives to a Passbook Savings Account
If you want to earn a higher interest rate on your savings or are looking for additional savings account perks and features like ATM access, you may consider another type of savings account. The best alternatives to a passbook saving account include:
- Money market account
- Savings account with credit-building features
- High-yield savings account with fraud protection
Money Market Account
A money market account (MMA) is a great option if you want to enjoy the features of both a savings and a checking account. It lets you save funds and earn interest but also provides you with a debit card, allows you access to ATMs, and often lets you write checks.
What’s more, these accounts offer higher interest rates than passbook accounts, often resulting in an APY as high as 4% or 5%. However, they also come with higher minimum deposit requirements and monthly fees.
Savings Account With Credit Building Features
A savings account with credit-building features is the only type of account that allows you to save money while building credit.
While most credit-building services require you to spend money on subscription fees and interest, this type of savings account provides an opportunity to grow both your credit and your funds without spending any money.
High-Yield Savings Account With Fraud Protection
A high-yield savings account offers higher interest rates than a passbook account and often helps you earn an APY ten times higher than a regular one. Similar to passbook accounts, these accounts are FDIC- or NCUA-insured up to $250,000, depending on your financial institution.
However, what traditional high-yield savings accounts don’t offer is fraud protection. Nowadays, when scammers are more successful than ever, choosing a savings account focused on protection against financial scams is imperative.
Enter FortKnox, a pioneer in security-oriented online banking with a primary focus on safeguarding funds from fraud.
