The advent of the Internet has changed the way we do many a thing; banking is just one of them.
From the passbook savings account that were and still are limited by geographical location, we’ve graduated to online savings accounts that offer various benefits that are missing from the passbook savings account.
However, not everything is better in the virtual world; both passbook and online accounts have their virtues and faults, and some things have been lost in the move away from the old passbook savings account.
Passbook Savings Account
This account is a simple savings (deposit) account with a bank, where traditionally, instead of being connected to a checking account and getting a bank statement, you keep your own records. To keep the record of your savings, you were given a passbook, a little book (small enough to fit in your shirt pocket) where you can physically record the deposits and withdrawals. Some banks still offer this type of account.
Editor’s note: the passbook savings account was my first experience into the banking world. My parents helped me open up the account and I used the account throughout high school to save money from my summer jobs.
Passbook Savings Account Benefits
- The very fact that access is restricted to them allows you to save your money instead of being tempted to spend it indiscriminately.
- No statements means more security for some customers who don’t want their information sent by mail.
- The availability of a number of physical branches allows you to make deposits easily – this means you avoid holding on to large sums of cash, not just for safety reasons, but also because you could so easily end up spending all of it without realizing the fact.
- You don’t incur hidden and recurring fees that are associated with some online accounts – like annual fees for ATM and debit cards and special fees for using your card to withdraw money from another bank’s ATM.
- The simplicity and manual nature of the account, makes it perfect for teaching kids about saving money.
Online Savings Account Benefits
Now we have statement savings as well as online savings as savings options. Here are some of the benefits of online savings accounts.
- You’re not tied down by physical location – you can make withdrawals through ATMs and transfer money to various accounts and towards different payments.
- The interest rate is a little higher than that offered by passbook savings accounts.
- You don’t have to maintain records in your passbook and carry it with you every time you need to make a deposit or withdrawal from your account.
- Although depositing money is a little tedious, all online banks allow direct deposits (for paychecks and other forms of income). Probably the only hitch comes when you’re trying to deposit a check – if your bank has no physical branches, you may have to deposit the check into another account and do an online transfer.
- Most online accounts don’t set a minimum balance, so you avoid the fees that come when you violate such limitations.
Common benefits offered by both kinds of accounts include insurance by the FDIC for your money – depending on the account, $100,000 to $250,000 of your money is insured. And although both offer relatively low interest rates when compared to riskier investments, they’re liquid assets and can be cashed in at any time unlike stocks or bonds that cannot be instantly liquidated.
If you want an account that allows you to save money, go with a passbook account; but if you want one that allows easy access to your money, settle for the online option – the choice is as simple as that. Shop around for the best interest rates and make your decision accordingly.
This article is contributed by Anna Miller, who writes on the topic of online degrees. She welcomes your comments at her email: firstname.lastname@example.org
Photo by jgmarcelino