What is a 'Transaction Deposit'

A transaction deposit is a bank deposit that has immediate and full liquidity, with no delays or waiting periods. Transaction deposits can be used for other transactions at the request of the account holder. A checking account, for example, is a common transaction deposit account and the account holder is allowed to withdraw the amount at any time.

BREAKING DOWN 'Transaction Deposit'

Transaction deposits stand in contrast to nontransactional deposits such as time deposits such as savings accounts. Nontransactional deposits have waiting periods and monthly limitations on the number of transactions allowed. According to Regulation D, savings accounts may require that the depositor give seven days notice before withdrawing funds. In practice, however, banks typically do not enforce this. To qualify as a savings account, however, "convenient transactions" must be limited to six per month.

Banks are required to keep sufficient reserves to cover deposit transactions. Time deposits such as savings accounts and certificates of deposit have lower reserve requirements.

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