Save money: savings account or savings book?

Savings book: unchanged principle for 200 years

The savings book has existed in its classic form since the beginning of the 19th century. The first official reference to a savings book can be found in the report of an employee of the Berlin City Savings Bank, which dates back to 1818: “Each interested party receives a so-called receipt book (…) When the receipt book is presented, the accountant compares it with the account in the main book and then enters the respective income or expenditure.

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Until today, this principle of the savings book or passbook has hardly changed. In a still physically existing book, all deposits, withdrawals and interest credits are recorded, which the owner of the associated savings account makes or receives. There are numerous explanations as to why this rather unfashionable form of investment is still so popular with some savers. It is precisely the traditional aspect that seems to attract local savers here. In addition, the passbook is considered an absolutely secure form of investment. It is protected by the statutory deposit guarantee. Accordingly, the word “safe” appears five times in the brief description of the passbook on the Sparkasse website.

A special form of the savings book is the premium savings. This is basically a savings plan in which you, as a saver, pay a fixed amount into the savings account on a regular basis, usually monthly, for a certain period of time. The bank rewards long-term deposits in the form of premiums, which are automatically credited to the savings account. This increases the interest gains - namely, a higher amount of interest is paid than was paid in by the saver.

Savings account: few advantages, but low costs

Security and low risk are basically the only advantages of the passbook. It is true that as a saver you also have the option of depositing or withdrawing money at any time, and the term of the savings book is also usually unlimited. However, this flexibility in availability is tempered by the fact that in most cases you can only withdraw 2,000 euros per month.

If you want to withdraw more, you must give three months' notice, which is standard for passbooks. Otherwise, the bank charges an early termination fee, also called advance or penalty interest. This is usually 25 percent of the savings account interest rate and is charged on the amount in excess of the withdrawal limit. However, the interest on advances is usually the only cost associated with the savings account. As a rule, customers pay neither fees for opening the passbook nor for account management.

Comparatively low return

Probably the biggest disadvantage of the passbook as an investment, however, is the comparatively low interest rate. Savings book interest rates are often so low that they are “eaten up” by inflation - in concrete terms, this means that investors with a savings book often lose money on a daily basis. Other forms of investment, such as call money accounts, generally have higher returns. In addition, the interest on a passbook is only paid out once a year - so you cannot benefit from compound interest effects spread over the year with a passbook.

How a savings book works

With a passbook, you often make deposits and withdrawals in the traditional way at the bank counter. Instead of a physical passbook, some banks also offer a so-called SparCard, which you can use to manage your passbook at an ATM. In this case, the entries in the book are replaced by account statements, which you generate as needed at the account statement printer. If you are a customer of a direct bank, you transfer the money online from your checking account or another account to the savings book.

Since interest received constitutes investment income, the state levies final withholding tax on it, the solidarity surcharge and, if applicable, church tax. The tax amount from the first two levies is 26.375 percent per year, but only for capital gains above the exemption limit of 801 euros or 1,602 euros for couples. You can find out everything you need to know about this tax in the detailed FinanceScout24 guide on the subject of final withholding tax.

Is a savings account comparison worthwhile?

If you want to invest in a savings account despite the many disadvantages that a passbook has today, you should compare the different providers beforehand. Although the interest rate level is low overall, there are still differences between the providers. This also applies to the amounts of the minimum as well as the maximum deposits. The minimum deposit is usually very low and rarely exceeds 10 euros. Some banks do not require any minimum amount at all.

Open and close a savings account: Online or at a bank branch?

If you want to open a savings book, you have two options: online or directly on site at the bank branch. You basically only need your ID card to complete the formalities. Also note that some banks require a (usually small) initial deposit as well as a minimum deposit - so you should have some cash on hand for an initial deposit. Furthermore, there are providers who charge penalties if their savings account does not have a certain minimum deposit.

When opening a savings account online, you enter your data in the appropriate fields of the application form. If you are already a customer of the bank where you want to open the savings account with passbook, you may not need to enter all the data again. The actual contract is usually sent to you by mail, it becomes valid only after you sign it. New customers must prove their identity in accordance with the requirements of the Money Laundering Act (GwG) - in most cases this is done using the so-called Postident procedure. The documents required for this are usually sent to you with the contract documents. At the post office, you will have to identify yourself, and then the postal employee at the counter will confirm your identity. Once all the documents have been received, the savings book - if a physical book is part of the contract - will be sent to you by mail.

Unless you are a customer of a direct bank, you can also simply open your savings book at a bank branch. A bank employee will go through all the points of the account opening application with you, and you will identify yourself with your ID card. The advantage of this procedure: Any questions will be clarified on the spot and you can take your passbook with you immediately.

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Canceling a passbook

You can cancel a passbook directly at the branch or by mail. Please note that the notice period for savings books is normally three months. As a rule, notice of termination should always be given in writing. Bank branches have appropriate forms available. If you do not give notice directly at the branch, you should send your notice by registered mail with advice of receipt, if possible, so that you can prove the notice in case of doubt. Regardless of whether you give notice in person or in writing, you should request confirmation of notice from your bank. If there is a physically present savings book, this must be cancelled. Therefore, you must either present it at the bank branch or return it to the financial institution by mail. Existing deposits will be transferred to a reference account or can also be paid out in cash at the branch.