Demand Deposit

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What is a 'Demand Deposit'

A demand deposit consists of funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be "demanded" by an account holder at any time. Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking. In contrast, a term deposit is a type of account which cannot be accessed for a predetermined period (typically the loan's term).

BREAKING DOWN 'Demand Deposit'

M1 is a category of the money supply that includes demand deposits as well as physical money, such as coins and currency, and Negotiable Order of Withdrawal (NOW) accounts. According to the Federal Reserve's Consumer Compliance Handbook, demand deposit accounts have these characteristics: no maturity period (or an original maturity of fewer than seven days), payable on demand, may be interest bearing, no limit on the number of withdrawals or transfers an account holder may make, and no eligibility requirements.

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RELATED FAQS
  1. For what types of accounts are demand deposits available?

    Learn about the different types of accounts designated as demand deposit accounts, such as savings accounts and money market ... Read Answer >>
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    Understand the meaning of demand deposits and term deposits, and learn about the major differences between these two types ... Read Answer >>
  3. What are the Federal Reserve's guidelines on demand deposit accounts?

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  4. What proportion of my income should I put into my demand deposit account?

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