Passbook Savings Account

That is right, we have options. Gone are the days where we are limited to the traditional bank next to our job location or business. In fact, it’s usually best if you do your research first, a lot of money can be saved and earned by doing this. So why do we need to find the best interest rate for our next passbook savings account?

Great question and one easily answered with another question. Do you like having your money working for you? I certainly do. Personally I hate to work for money, I prefer to work for fun. But once you have your money, how can you make the most of it. Well, you could invest in the stock market and lose it all. You could play online poker with dreams of being the next James Bond playing at Monte Carlo and probably lose it all in the process.

Or you could invest your money in a passbook savings account with a great interest rate where there is no risk – just reward – a guaranteed monthly payday. If this sounds good, as it does to me, then have your money work for you. Instead of working for your money. The goal here is “set it up and forget it.”

But a little work and research will need to be done before hand, before opening up your bank account. If you are thinking of simply opening up an account at the closest Chase bank, forget about that. Start thinking of high interest online savings account. The first step is research. You can start by going to Google and searching for online savings accounts.

Although there is one tool that will be vital for you, it is www.bankrate.com . Simply go to this website and click, “checking & savings”. From here you can narrow down to local, national, and the amount you want to invest. Once you’ve selected your criteria, a list of the best rates will appear. Then, simply work down the list and see what catches your eye. Once you find a bank, take a look at the bank’s website and contact customer service. If you like what they offer, then one more step is needed before you open up your next savings account.

Since most of the banks offering the best interest rates will be online banks, you want to do slightly more research before giving them your money. The next step is to read reviews. Google search customer reviews on the banks you are most interested in. Find out if there have been any problems opening or closing a checking account or a passbook savings account with them. See if withdrawing your money is a long drawn out process or as easy as pie.

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What? There is more than one form of a passbook savings account? You’re darn right there is. Just with everything else in life, nothing is that easy. Not until you have the right information to guide you.  So sit back, grab a drink, and get ready to learn about the four types of savings accounts available to you.

Savings Account Option 1 – Basic Savings Account

The basic passbook savings account is the simplest and most common type of account. This account is usually used only to deposit your money in a safe place. To withdraw your money, you’re not often given an ATM or bank card, but need to do it in person at the bank.

The minimum deposit for this form of savings account will tend to be the lowest. As will the interest rate received, usually between .25% and 1%. But hey, it’s the basic account. Kind of like going to Cold Stone Ice Cream Parlor and getting the vanilla flavor.

Savings Account Option 2 – Money Market Accounts

Money Market accounts will offer a higher interest rate, but will have more restrictions and guidelines than the basic account. These restrictions may include:

- Minimum deposits
- Limit of transactions and transfers pre month
- Tier rates for the amount in the account. Meaning, the more you have in the account, the more interest you will receive.

The benefits of this account is that you will receive a higher interest rate than the basic savings account and have the ability to write checks where the money is taken directly out of your money market account.

Savings Account Option 3 – High Yielding Savings Account

High Yielding Savings Accounts are like a combination of the money market account and the basic savings account. They will offer you a higher percentage of interest, usually between 1.5% – 2.5%.

This is a good option for you if you are okay with your money just sitting. In most cases you do not have checks or an atm card to withdraw your money.

Benefit is the higher interest rate. A Drawback is that it is not as easy to withdraw your money and there are higher minimum requirements for the amount in the account.
Savings Account Option 4 – Online Savings Account

This is a new and upcoming style of banking. You might be interested in this if you do not need your money to sit in a standard bank and trust a bank you have not set foot in.

Benefit is the interest rate received is significantly higher, and can be between 3% and all the way up to 6%. The drawback is that you cannot actually walk into the bank.  No matter what type of account you choose, we always recommend personal finance software to keep track of your account standings.

Therefore, when deciding which passbook savings account is best for you, decide wisely and have your money work for you.

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A very common question people have when researching their next passbook savings account is, how do they actually work? How is that you are paid for keeping your money in their bank?

To start with, these savings accounts are the most popular bank accounts in America (just in front of checking accounts).

These kinds of accounts are pretty simple to define. They are a safe place where people can put their money and earn a little bit of interest at no risk. It is not a retirement plan where you may lose or gain money, but the holder of the account is guaranteed a certain amount of money back each month. This is the interest rate of return.

So how does this work? How does the bank afford to pay you to keep your money in your account in their institution? The answer is easily broken down into three parts:

1- You open a passbook savings account at the bank of your choice. On this account, you are guaranteed a certain amount of interest paid to you.

2- The bank loans out money to other people in the form of mortgages, car loans, personal loans, etc…

The bank then charges a certain amount of interest to the receivers of this loan. They charge them a higher percent of interest than they return to you. Example, the bank gives your friend a car loan at 7% interest. Your savings account pays you 2% interest. They profits are 5%.

3- The bank pays you your interest. Now the interest rate is usually compounded on a daily or monthly schedule.

Do not underestimate the power of compounded interest on a savings account. One or two percent may seem very little in the short run, but in the long run it will add up. Even Albert Einstein once said that compound interest is one of the most powerful forces on Earth.

This is the reason why you want to be paid interest on a daily schedule and not pay interest on a daily schedule. So be sure that when you receive those car loans or house loans, get rid of those as quickly as possible. Do not have one of the most powerful forces on the planet working against you. Have it work for you!

Now when you see those pennies or dollars compiling themselves in your passbook savings account, you know where it comes from. Just sit back and enjoy the free money.

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