Advantages & Disadvantages of Passbook Savings Account

Keep track of your finances with a passbook savings account

Passbook savings accounts are basic savings accounts where all of your transactions are recorded in a ledger, or booklet. These accounts are great for those who prefer face-to-face banking transactions. Those who prefer to use ATM cards and online account management services may find a passbook savings account to be cumbersome.


Safer Transactions

Some people feel that passbook savings accounts offer safer transactions. Not everyone trusts ATM machines--a number of people feel the machines are confusing and unsafe. These customers want to actually see who is handling their money. A passbook savings account allows for face-to-face contact that puts some people at ease.


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Easy to Focus on Saving

With a passbook savings account, you do not use an ATM card to withdraw your funds--withdrawals must be made in person. This helps you save your money because it is less likely that you will make a frivolous purchase. If you want to make a withdrawal, you'll have to go to the bank, fill out a slip, and hand it to the teller. The transaction is entered in the passbook. This gives you more time to think about the transaction than if you simply swipe a card.


Low Barrier to Entry

Passbook savings accounts are great for those who want to save without worrying about minimum balances and monthly fees. These accounts usually have no fees or monthly balance requirements; in exchange, they offer lower interest rates, a potential disadvantage.


Low Interest Rates

The main disadvantage to passbook savings account is their low interest rates. If you are looking to make a high return on your money, a passbook savings account is not a good option. According to, the average national APY was less than 1 percent as of December 2010. However if you just want to have liquid funds available in case of an emergency, this may not be of concern to you.


No Monthly Statement

With a passbook savings account, you do not receive a monthly statement. You have to make sure the deposits, withdrawals, and interest are recorded in your booklet. If you are not very organized, this can be a big disadvantage.