Passbook Savings Account Advantages And Disadvantages
A passbook savings account features both advantages and disadvantages, and while these accounts are right for some they may not be right for others. To determine whether this may be one of the best savings accounts in your situation you will need to evaluate the benefits, and determine if these outweigh any disadvantages. A passbook savings account is a simple product, and advantages will include simplicity as well as safety and security. FDIC insurance will cover most of these accounts, and they offer incredible liquidity as well. The account funds can be withdrawn without any notice to the financial institution, and these accounts are interest bearing.
The disadvantages of this account type include lower interest rates for savings accounts. In many cases the lower interest rate paid for a passbook savings account could be increased by placing these funds in a different account type instead. Another drawback only applies to accounts with balances over $100,000, because FDIC coverage will not cover any amount above this. Right now the passbook savings account rates are set at a point that is actually lower than inflation, and the final result could be a lower account value in the future and a calculated loss.
A savings account calculator can help you determine how much you will need to put away on a regular basis to reach your goals, but this tool can not identify the ideal account type to help you get there. You will need to consider both the advantages and disadvantages of a passbook savings account, and then determine if this type of account is the right place for your money. Because these are fixed rate savings accounts you may find that you are locked into a specific rate that is lower than other savings options, or you may find that this account type fits your needs perfectly.