Comments about ‘Letters: Passbook accounts’

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Published: Wednesday, Jan. 9 2013 12:00 a.m. MST

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Twin Lights
Louisville, KY

Passbook savings interest rates essentially mirror inflation. With low inflation comes low interest rates on savings accounts. All you can do with a passbook account is keep pace with inflation. You do not actually earn anything.

Brigham City, UT

Less greed...

Moab, UT

The Fed Reserve sets interest rates. If a bank can borrow from the Reserve at less than 1% why would they pay more on savings accounts. If interest rates were allowed to rise to 3 to 4% that would triple the interest on our 16 (soon to be 17) trillion debt, and our house of cards would collapse.

Sandy, UT

Twin Lights:

Two things: first, my credit union is currently paying 0.10% on "dividendes," which is their version of a passbook account. Checkbook savings can be as high as 0.55% The latest CPI is 1.8%. Please comment on how savings are keeping pace with inflation.

Second, John Williams of Shadow Government Statistics has been keeping track of how the BLS has changed their methodology over the years for calculating the CPI. Using 1980 methodology, the CPI would currently be at about 9%. Even using 1990 methodology, the CPI would be above 5%. If I were staying current with inflation in, say 1960, with a passbook savings rate of 4%, shouldn't I be earning at least 9% with a passbook account today since they were using the earlier method? How did banks in the past afford to overpay me if the 1960 methodology was wrong and today's is right?

Twin Lights
Louisville, KY


Reference passbooks, perhaps I should have said “the best they will do is keep up with inflation”. They are not going to return much if anything above that even in other times. They are a safe place to park money and are essentially a cash asset. Nothing more.

Beyond conspiratorial explanations (which, I assume you are not interested in) the govt. mostly (not in every case, but mostly) changes the measurements to fit the realities on the ground. How do you account for the price of a 1960s iPhone? I certainly do not feel like I am experiencing 9% inflation currently (and my income has been relatively flat). So, the answer to your final question is both were right at the time.

Oakley, UT

Once upon a time, the banks needed depositors so they would have capital to loan, even offering free toasters etc., to new depositors.

That is no longer the case. They can borrow from the Federal Reserve at very low rates. By regulation, they must continue to offer savings accounts, checking accounts, and other services, to the public.

Until, unless, the Federal Reserve is abolished, don't look for any change to your savings.

Salt Lake City, UT

I've never heard of the term passbook before. Is that just referring to normal bank/credit union savings accounts everyone has and passbook is just an old school word used for it?

Salt Lake City, UT

Anyway, interest rates are based largely on interest on the debt rates the gov't pays. Right now those rates are so low that a 10yr US debt investment actually would pay out less than inflation because the US dollar is such a safe investment (well, until maybe the tea party makes us crash into the debt ceiling) that people are willing to buy US debt for less.

Sandy, UT

Twin Lights:

The inflation rate in 1960 (according to the BLS) was less that 2%, yet passbook savings at that time were in the 5% range, plus or minus. I'm pretty sure when I had a passbook back then, I was staying slightly ahead of inflation. What changed? People then were smart enough to use passbooks accounts frequently. Now they're smart enough not to. Something is not making sense. How am I supposed to stay even or maybe get ahead like I could then without taking on riskier investments?

Twin Lights
Louisville, KY


I don't know about the 1960s (in terms of interest rates on passbook savings). During my adult life, passbooks have never yielded much above inflation - at least not for long. And, from the rather large fees now being charged to small deposits I assume small deposits are less valuable to banks today.

Part of that is likely that deposits are less stable than they once were and are not seen by banks as reliable. Back in the day, deposits were more stable and banks valued them more.

Of course there is also the rise of non-banking options (some sold by banks) in the form of money market accounts and mutual funds.

Online banking can offer some better rates (especially on CDs where the accounts are guaranteed to be more stable given the penalties).

Not sure what else to say.

Murray, UT

Banks used to pay you interest for the money you put into an account.
Now you pay the bank for the privilege of putting your money in their bank.
That is why I put my money in a credit union. they do not pay you much; but at least you do not lose money in your account.
Banks could get by without charging customers, but why should they?
Its not like if they fail; the federal government will not force us all to bail them out.

American Fork, UT

What will it take to create an economy where an average person can earn a simple, dependable and safe return on savings that will enable him or her to stay above water? Interest rates that are much less attractive to borrowers.

Provo, UT

@alt -- Passbook savings is just the regular savings account you can get at a bank. It's an old school term because you used to get an actual little book that the bank could write your balance/interest earned/deposits/withdrawals in. At least that's the way I remember it from when I was a kid.

Salt Lake City, UT


Wonder is right. The term "passbook" hearkens back to the days when you would take your savings account passbook (which was sort of like a check register, with the account number and the name of the account owner at the front) to the teller at the bank, and they would record in it your interest earned on your account (typically quarterly). Passbooks have obviously long since gone the way of service station attendants who would pump your gas, check your oil, and clean your windshield for you.

Today, they are called "statement savings accounts", or something similar.

Ultra Bob
Cottonwood Heights, UT

Thank you, Steven Yorgason for asking the question.

“What will it take to create an economy where an average person can earn a simple, dependable and safe return on savings that will enable him or her to stay sabove water?”

Stop trying to live by the rules and programs of the people who lived 250 years ago. We need to rewrite the book, change the rules, come up to date with the needs and realities of civilization in the 21st century. We need to recognize that people have lost the ability they once had to provide the necessities of life and liberty. That ability has a name and a cause. It’s called unemployment and it’s fire is fueled by the improper operation of the capitalistic economic system.

Unemployment should not be allowed. A persons success in life should depend on his abilities and ambitions, not on the mere availability of his labor.

The capitalist of today have gone too far and turned a good and proper way for people to live into a tool of oppression. They are not evil or particularly bad people, it’s just that they don’t know when to quit.

Draper, UT

No chance this will happen, but just for argument's sake, consider this solution to Mr. Yorgason's question: Congress instructs the Federal Reserve Bank to raise interest rates on money it lends to banks (it currently provides near-free money to lenders – 0.00 to 0.25%) to let’s say 7%, and the lending banks then lend that money out for home loans and other purposes at 9%, and therefore can offer their depositors 5% interest and keep the 2% difference as profit. In so doing, depositors would be spared from the erosion of inflation and would be able to earn a modest--but reliable--return on their savings.

Home buyers would have to pay about double the interest than on loans now being offered, but the current low loan rate has done little to relieve the rigor mortis of the real estate market while threatening to drag savers into inflationary quicksand.

Brigham City, UT

Holy cow, alt134. You're a lot younger than I would have thought to not know what a passbook is. Wonder and SG both gave pretty good explanations regarding passbooks. They were still quite prevalent in the late 70's when I got my first job as a teller at a local bank that hasn't forgotten who pays the bills and keeps them in business. (Funny how a tag line that is so repressive can be taken as a positive thing)

I do remember how hard it was for "older" people to get over the whole passbook mentality and just accept that their money was "safe" without carrying a ledger with them that showed how much was in their account.

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