What Is a Call Deposit Account? Definition and How It Works

What Is a Call Deposit Account?

A call deposit account is a bank account for investment funds that offers the advantages of both a savings and a checking account. Like a checking account, a call deposit account has no fixed deposit period, provides instant access to funds, and allows unlimited withdrawals and deposits. The call deposit also provides the benefits of a savings account through the accrual of interest.

Understanding a Call Deposit Account

Call deposit accounts provide the benefits of an interest-bearing account without the risk of withdrawal penalties. The rate of interest a call deposit account pays depends on the amount of money in the account, a system commonly referred to as banded interest rates.

Along with higher interest rates and a guaranteed level of liquidity, call deposit accounts can be accessed at any time based on the availability of online, mobile, or phone banking as well as automated teller machine (ATM) access. Remote check deposits or direct deposits may be available depending on the precise services offered by the institution.

Most withdrawals from call deposit accounts do not require prior notice unless they are over a certain amount. Based on the amount of funds an institution must maintain as a reserve, notice may be required for large cash withdrawals.

Additionally, institutions may have daily withdrawal limits designed to lower the risk of losses in the case of identity theft. Transactions above the amount as stipulated by the institution may require notice, though this provision applies to traditional checking and savings accounts as well.

Special Considerations

Up until April 24, 2020, Regulation D, a regulation in place at the federal level, provided restrictions on the number of withdrawals that could be made from interest-bearing accounts, such as high-interest savings accounts and money market accounts. The limit was usually six withdrawals per month; however, since then, the restriction has been retired, though some banks may still limit withdrawals.

Call deposit accounts were/are not subjected to these limits, leading to higher levels of liquidity. This means that a traditional high yield savings account with such transaction limits may offer a higher interest rate, but at the cost of liquidity.

Additionally, call deposit accounts do allow investors to deposit and withdraw funds in several currencies, which commonly include the U.S. dollar, the euro, and the British pound. This flexibility reduces investors' exposure to foreign exchange expenses and currency risk.

Call deposit accounts often have minimum deposit requirements to establish an account and may have minimum daily balance requirements.