It locks you to postgres. You don’t necessarily have full control over postgres unless you are using your own instance / service, but oftentimes you might need to connect to an external one. SQLite gives you a local option.

Also what do you even mean with “does it store passwords?” A password is just a TEXT or a BLOB if you are feeling charitable and SQLite does support those since forever. If you can store “hello world” you can store a password (just… don’t do it in plaintext, but storage is different from encryption).