Passbook
A passbook is a physical booklet provided by a bank that records all transactions made for a savings account. It was traditionally used to keep track of deposits, withdrawals, and interest earned. Passbook savings accounts are known for offering low yields, but they are very secure because deposits in passbook accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
Key Features
- Depositor’s Information: Contains the depositor’s name and account number.
- Transaction Records: Lists all deposits, withdrawals, and interest earned.
- Security: Insured by the FDIC up to $250,000.
- Yield: Typically, passbook savings accounts offer lower interest rates compared to other types of savings vehicles.
Examples
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Jane Doe’s Passbook Savings Account: Jane deposits $1,000 in her passbook savings account. Over time, she makes several deposits and withdrawals, and each of these transactions is recorded in her passbook along with the interest earned.
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ABC Bank: ABC Bank provides each customer with a passbook when they open a savings account. This allows the customer to maintain a physical record of all transactions conducted in their account.
Frequently Asked Questions (FAQs)
Q1: What is a passbook savings account?
A1: A passbook savings account is a type of savings account where transactions are recorded in a physical passbook provided by the bank.
Q2: Are passbook savings accounts safe?
A2: Yes, passbook savings accounts are safe as deposits in them are insured by the FDIC up to $250,000.
Q3: Do passbook savings accounts offer high-interest rates?
A3: No, passbook savings accounts typically offer lower interest rates compared to other types of savings accounts.
Q4: How do I update my passbook?
A4: To update your passbook, you need to visit your bank and present it to a teller who will manually record or print the latest transactions.
Q5: Can I use a passbook savings account for electronic transactions?
A5: While passbook savings accounts are traditionally not used for electronic transactions, many banks now offer online access to these accounts.
- Federal Deposit Insurance Corporation (FDIC): A U.S. government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.
- Savings Account: A bank account that earns interest on the deposited funds.
- Interest Earned: The amount of interest paid by the bank to the account holder, based on the account balance over time.
- Deposit: Funds added to a bank account.
- Withdrawal: The act of taking money out of a bank account.
Online References
Suggested Books for Further Studies
- “Bank Management and Financial Services” by Peter Rose and Sylvia Hudgins
- “Understanding Money and Banking” by Evan Fred
- “Principles of Banking” by American Bankers Association
Fundamentals of Passbook: Banking Basics Quiz
### What is a passbook primarily used for?
- [x] Recording transactions in a savings account
- [ ] Sending money internationally
- [ ] Storing large sums of physical cash
- [ ] None of the above
> **Explanation:** A passbook is primarily used to record transactions including deposits, withdrawals, and interest earned in a savings account.
### What makes passbook savings accounts particularly secure?
- [ ] The physical passbook itself
- [x] FDIC insurance
- [ ] High interest rates
- [ ] Limited access to the internet
> **Explanation:** Passbook savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC), making them very secure up to $250,000.
### Do passbook savings accounts typically offer high interest rates?
- [ ] Yes, they offer high interest rates.
- [x] No, they offer low interest rates.
- [ ] Yes, but only if they are held more than 10 years.
- [ ] Yes, they can vary greatly.
> **Explanation:** Passbook savings accounts generally offer lower interest rates compared to other savings vehicles.
### How can a passbook be updated?
- [ ] Through an online banking portal
- [ ] Via mobile banking apps
- [x] By presenting it to a bank teller in person
- [ ] Via ATM machines
> **Explanation:** A passbook is typically updated by presenting it to a bank teller, who will manually record the latest transactions or print them inside the passbook.
### What kind of account is a passbook associated with?
- [ ] Checking account
- [x] Savings account
- [ ] Credit account
- [ ] Brokerage account
> **Explanation:** A passbook is associated with a savings account, which tracks deposits, withdrawals, and interest earned.
### How much are deposits insured for in passbook savings accounts by the FDIC?
- [ ] Up to $50,000
- [ ] Up to $1,000,000
- [x] Up to $250,000
- [ ] They are not insured
> **Explanation:** Deposits in passbook savings accounts are insured up to $250,000 by the FDIC.
### What information is typically listed in a passbook?
- [ ] Only depositor’s name
- [ ] Social Security Number
- [x] Depositor's name, account number, all transactions
- [ ] Just the total account balance
> **Explanation:** A passbook lists the depositor's name, account number, as well as all transactions including deposits, withdrawals, and interest earned.
### Is a passbook the only way to keep track of savings account transactions today?
- [ ] Yes, it is required
- [ ] No, online banking can be used
- [x] No, there are also electronic methods
- [ ] Yes, as it encompasses all modern features
> **Explanation:** No, passbooks are traditional, but modern methods like online banking also allow for tracking savings account transactions electronically.
### Who can hold a passbook savings account?
- [ ] Only corporate entities
- [ ] Only affluent individuals
- [x] Any individual who opens a savings account
- [ ] Only those over 45 years of age
> **Explanation:** Any individual who opens a savings account can hold a passbook savings account, regardless of age or financial status.
### How does a depositor benefit from a passbook?
- [ ] Immediate loan approvals
- [ ] Priority banking services
- [x] Easy physical record-keeping
- [ ] Free international travels
> **Explanation:** A passbook provides easy physical record-keeping of all transactions made in the savings account.
Thank you for learning about the fundamentals of passbooks and testing your understanding with our quiz. Continue to improve your knowledge on banking and financial instruments!
