What Is a Passbook Account?

Although passbook savings accounts have fallen out of fashion, they can be helpful for those who prefer to visit banks in person or who want to control their spending. This special type of bank deposit account provides the customer with a small booklet, typically about the size of a passport, and a teller updates it with recent transactions and account information.

Here’s more about how passbook savings accounts work, which banks and credit unions offer them, and the pros and cons of these accounts.

What is a passbook savings account and how does it work?

A passbook savings account is a type of savings account that you can open at some banks and credit unions. It’s a deposit account, meaning you can make deposits and withdraw or transfer money.

When you open a passbook account, the bank will give you a physical ledger, or passbook, to keep track of your banking transactions. Every time you need to make a transaction, you’ll have to visit the bank in person and bring the book with you. The bank teller will record the transaction details in the passbook for you.

Passbook savings accounts typically earn interest, but rates may not be competitive. They generally have low minimum deposits and fees.

Advantages and disadvantages of passbook savings accounts

If you’re considering opening a passbook savings account to better control your spending or to teach a family member the basics of banking, weigh the pros and cons:

Pros

• Backed by FDIC or NCUA insurance: If you open an account with an FDIC-backed bank or an NCUA-backed credit union, the deposits in a passbook savings account are insured up to a maximum of $250,000. That’s the standard coverage limit per depositor, per insured bank or credit union, per ownership category.
• Helps control spending: Because you have to visit a bank in person to make a withdrawal, the extra hassle of driving to a local branch during banking hours can be enough of a deterrent to curb your spending. If you have trouble sticking to a budget or tend to do impulse shopping, the added steps can help you manage your finances and save money.
• Typically requires low minimum deposit: The deposit requirements for passbook savings accounts tend to be quite low. Depending on the bank or credit union, you may be able to open an account with as little as $1.

Cons

• Withdrawals may be limited: Passbook savings accounts, like traditional savings accounts, often have limits on monthly withdrawals or transfers. If you exceed the number of allowed withdrawals, such as six per month, your account may be charged an excess transaction fee or converted into a checking account.
• Fees to replace lost or damaged passbooks: If you lose the physical banking passbook for your account, you could be charged a fee for a new one.
• In-person visits required for transactions: Although some banks or credit unions permit direct deposits to a passbook savings account, other transactions, such as withdrawals, can only be completed in person. Living a good distance from a branch or having a schedule that makes visiting the branch during banking hours challenging can be a significant hardship.
• Lower rates than other options: Although passbook savings accounts are typically interest-bearing accounts, their annual percentage yields (APYs) tend to be lower than the national average for savings accounts.

Is a passbook savings account for me?

A passbook savings account can be a useful tool for some individuals. If you fit into one of the following profiles, a passbook savings account could be for you:

• You prefer in-person banking: If you prefer to visit a bank in person and work with a bank teller — and live near a bank branch — you may appreciate the bank account’s requirements and the personal attention you receive.
• You struggle with impulse spending: If you’ve had issues making unnecessary purchases, the requirement to visit a bank in person to withdraw money can help you control your spending and avoid overdrafts.
• You have a child who wants to learn about managing money: A passbook savings account can be a good starting point for a family member who wants to learn about personal finance and banking. Accounts have low minimum deposit requirements and fees, plus working with a teller to handle transactions can deliver important educational moments.

Which banks offer passbook savings accounts?

With the increased popularity of digital and online banking, the availability of passbook accounts is declining. No major banks, such as Bank of America, Chase and Wells Fargo, offer passbook savings accounts.

However, you can still find these accounts mostly at a few regional or community banks and credit unions.