By BankingMyWay.com Staff
In the past, most average Americans put their money into a passbook savings account.

Generally opened at a local bank, savings and loan or a credit union, deposits and withdrawals from these accounts were recorded in a small booklet about the size of a passport. When account holders wanted to make transactions, they would bring the passbook to the bank and the teller would record the transaction in the book, along with any earned interest.

In the second half of the 20th century, particularly in the 1970s and 1980s, passbook savings accounts paid much higher interest rates than the savings accounts of today, at times over 10%. The money in these accounts was used to lend to other bank customers in the form of mortgages, car loans and business loans, which generally carried a much higher interest rate. Consequently, passbook savings accounts were often the sole savings vehicle for average Americans, whether it was for college tuition, a down payment or retirement.

Today, passbook savings accounts still exist in the form of statement savings, though interest rates are much lower. With these accounts, rather than track each transaction in a passbook, account holders receive a regular monthly or quarterly statement in the mail that details both your transactions and interest accrued.

Now, thanks to the advent of online banking, some banks offer the convenience of electronic statements, allowing account holders to go “paperless” and receive only e-mail or uploaded copies of their bank statements.

Other than how transactions are tracked, there really are not significant differences between passbook savings accounts and statement savings accounts. Of the few banks that do still offer passbook savings accounts, the same type of restrictions are still typically applied to both. For example, Corus Bank (Stock Quote: CORS) offers both passbook and statement savings accounts with a minimum balance requirement of $300 and a minimum initial deposit of $50. Both accounts are limited to 12 free withdrawals per quarter and assessed a $1 fee above that limit. The only difference is that with the statement account, account holders can make transfers using the Teller Phone system. Both accounts currently have an APY of 0.5%.

That said, keeping a large amount of money in a savings account, whether it be passbook or a statement savings is not recommended. Savings accounts pay some of the lowest rates, next to certain interest checking accounts.  According to BakingMyWay.com, the current national average interest rate for a savings account is 0.26%. Though, money market accounts and certificates of deposit (CDs) offer significantly higher returns -- money market accounts currently offer a national average of 0.53%, while a 12-month CD is at 1.45%.

In the end, whether you choose a savings account, money market or CD, consider your money safe, as all three accounts are FDIC insured.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.