Ninety-Day Savings Account

A 90-day savings account is a type of passbook savings account that guarantees a fixed rate of interest for 90 days – from date of deposit to date of withdrawal. Upon maturity account holders can either close the account and withdraw their funds or roll the accrued balance over into another 90-day savings account or another type of account. Some banks use the 90-day Treasury bill interest rate to determine the amount of interest offered on 90-day savings accounts.

Passbook savings accounts got their names because account holders were given a small book in which the bank staff would record all deposits, withdrawals and interest accrued. Passbooks have for the most part disappeared, given that most people now receive monthly statements by mail or email. Some banks still offer accounts called passbook accounts.

A passbook was traditionally used for accounts with a low transaction volume, such as a savings account. A bank teller would write the date and amount of the transaction and the updated balance and then initial the entry.

Passbooks appeared in the 18th century to allow customers to hold transaction records on their own for the first time. Until then transactions were recorded in ledgers at the bank, so customers had no record of their own deposits and withdrawals.

Ninety-day savings accounts can be a competitive alternative to short-term certificates of deposit (CDs) or T-bills because they have a low risk of default and short maturity.

A certificate of deposit (CD) is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. A CD may automatically renew upon the maturity of the original CD.

A CD restricts access to the funds until the maturity date of the investment. CDs are issued by commercial banks and are usually insured by the Federal Deposit Insurance Corporation up to $250,000 per individual. It is possible to withdraw money from a CD prior to the maturity date, but this will often incur a penalty.

CDs operate under the premise that an investor is entitled to increased return in exchange for giving up liquidity. Under typical market conditions long-term CDs have higher interest rates than short-term ones. There is higher risk in allowing someone to hold your money for a long period of time. In addition, an investor must be compensated for the opportunity cost of not having access to the money.