Modern savings accounts are a combined product of the Internet, downsized personal banking, and banking-related expenses downloaded to the consumer. Mailed or e-statements have replaced the traditional passbook. Savings accounts may even be entirely online, with no physical branch offices at all. However, these modern features may not suit all bank users. There is still a need for the old-fashioned savings account.
Properties of an old-fashioned savings account
The transactions and balance of an old-fashioned savings account are recorded in a passbook, which is replaced each time it fills up. The passbook is usually updated through a teller, although some banks may have this option at their ATMs. The minimum required balance is usually very low, and they have no monthly fee.
For a truly old-fashioned savings account interest is calculated and paid monthly, semi-annually, or annually. Withdrawals from these savings accounts used to be free of charge, and without limits. It goes without saying that old-fashioned savings accounts never had perks such as loyalty reward programs.
Why an old-fashioned savings account is sometimes preferable
If you are opening your first savings account, an old-fashioned bricks and mortar version will help you learn about and develop savings skills. The same goes if you know you have a problem saving money. Having to match bank hours and face a teller each time you want to make a withdrawal will curtail impulse buys the way little else can. Online accounts and ATM cards make it too easy to break the savings habit before you have a chance to develop it in the first place.
Some people simply prefer to deal with tellers face to face. In small towns or small branches the tellers may know each regular customer by name, and not just because the computer screen is coughing up your personal data.
Some people cannot use online banking. As of 2010, a third of all Americans don’t have broadband service. A fifth of this group (1/15 of the total) don’t even have a computer. Online banking is not an option for people who don’t have Internet access.
People who move frequently, who have an insecure mailbox, or who have had other difficulties in receiving their mail may prefer not to have sensitive financial information sent to them in the mail. Email accounts can be hacked or may otherwise be compromised, as with a work-related email account which is subject to workplace monitoring. A passbook avoids both sets of complications.
Passbooks save on paper over mailed statements, but not necessarily over e-statements. If all other records are kept electronically, the e-statement is the least wasteful. However, if a hard copy of each e-statement is printed out each month, then the only paper edge over a mailed statement is the envelope and stamp. Having to print out each e-statement also downloads the cost of printing onto the bank customer.
In theory, a savings account which is not linked to a rewards program should offer the bank customer that savings in the form of higher interest. In practice, savings accounts without loyalty rewards may have slightly lower fees.
All bank savings accounts, including passbook savings accounts, are protected by the Federal Deposit Insurance Corporation (FDIC). All credit union savings accounts are protected by the National Credit Union Administration (NCUA).
Are passbooks still available?
Many banks still offer a basic old-fashioned savings account, complete with passbook and no monthly fee. Some even offer savings accounts stripped of all the bells and whistles, although paying a fee for withdrawals is now standard for nearly every savings account. A few small banks still offer 1-2 withdrawals per month free, or let you transfer funds to your same-bank checking account free of charge.
No-fee checking accounts are available, but they pay little or no interest. Just about any bricks-and-mortar savings account will have the same or lower interest rate as an otherwise comparable online savings account.
However, the days of monthly calculated interest on a savings account have mostly gone the way of the Dodo bird. Nearly all savings accounts today are based on daily interest, totaled, and recorded monthly. If you prefer monthly, semi-annual, or annual interest calculations and having your money locked away is not a problem, then a certificate of deposit (CD) may serve you better than a savings account.