https://www. investopedia.com/terms/d/demanddeposit.asp
`PERSONAL FINANCE > BANKING
`Banking
`Personal Finance
`
`Demand Deposit Definition
`
`Demand Deposit
`Demand Deposit
`
`-B
`
`y JAMES CHEN Updated March 31, 2021
`By James Chen Updated March 31, 2021
`Reviewed by SOMER_ANDERSON
`Reviewed by Somer Anderson
`
`Table of Contents
`Table of Contents
`What Is a Demand Deposit?
`What Is a Demand Deposit?
`
`How Demand Deposits Work
`How Demand Deposits Work
`
`Special Considerations
`Special Considerations
`
`Types of Demand Deposit
`Types of Demand Deposit
`Accounts
`Accounts
`
`Requirements for Demand
`Requirements for Demand
`Deposits
`Deposits
`
`Demand Deposit vs. Term
`Demand Deposit vs. Term
`Deposit
`Deposit
`
`Demand Deposit Account
`Demand Deposit Account
`FAQs
`FAQs
`(cid:141) The Bottom Line
`The Bottom Line
`
`What Is a Demand Deposit?
`What Is a Demand Deposit?
`A demand deposit account (DDA) is a bank account from which deposited funds can be
`A demand deposit account (DDA) is a bank account from which deposited funds can be
`withdrawn at any time, without advance notice. DDA accounts can pay interest on the
`withdrawn at any time, without advance notice. DDA accounts can pay interest on the
`deposited funds but aren't required to. Checking accounts and savings accounts are
`deposited funds but aren’t required to. Checking accounts and savings accounts are
`common types of DDAs.
`common types of DDAs.
`
`KEY TAKEAWAYS
`Key Takeaways
`• Demand deposit accounts allow funds to be withdrawn at any time from the
`Demand deposit accounts allow funds to be withdrawn at any time from the
`financial institution.
`financial institution.
`• Demand deposits provide the money consumers need for cash and for daily
`Demand deposits provide the money consumers need for cash and for daily
`expenses and purchases.
`expenses and purchases.
`• Demand deposit accounts pay little orno interest-the trade-off for the funds
`Demand deposit accounts pay little or no interest—the trade-off for the funds
`being so readily avail able.
`being so readily available.
`• Demand deposit accounts can have joint owners: Either owner may deposit or
`Demand deposit accounts can have joint owners: Either owner may deposit or
`withdraw funds and sign checks without permission from the other.
`withdraw funds and sign checks without permission from the other.
`• Demand deposit accounts contrast to time or term deposit accounts, in which
`Demand deposit accounts contrast to time or term deposit accounts, in which
`the funds are locked up for a certain period, unavailable for access without
`the funds are locked up for a certain period, unavailable for access without
`penalty, if at all.
`penalty, if at all.
`
`D
`
`(cid:127) (cid:141) =HD
`
`1:19
`
`Demand Deposit
`Demand Deposit
`
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`How Demand Deposits Work
`How Demand Deposits Work
`If depositors were required to notify their banks in advance before withdrawing funds, it
`If depositors were required to notify their banks in advance before withdrawing funds, it
`would be quite a challenge to obtain cash or make mundane transactions. Demand
`would be quite a challenge to obtain cash or make mundane transactions. Demand
`deposit accounts (DDAs) are intended to provide ready money-the funds people need
`deposit accounts (DDAs) are intended to provide ready money—the funds people need
`to make a purchase or pay bills.
`to make a purchase or pay bills.
`
`The account's holdings can be accessed at any time, without prior notice to the
`The account's holdings can be accessed at any time, without prior notice to the
`institution. The account holder simply walks up to the teller or the ATM-or,
`institution. The account holder simply walks up to the teller or the ATM—or,
`increasingly, goes on line-and withdraws the sum they need; as long as the account has
`increasingly, goes online—and withdraws the sum they need; as long as the account has
`that amount, the institution has to give it to them. The money is available "on-demand"
`that amount, the institution has to give it to them. The money is available "on-demand"
`-hence, the name "demand deposit" for this sort of account.
`—hence, the name "demand deposit" for this sort of account.
`
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`Demand deposit accounts, which typically are offered by banks and credit unions, are in
`Demand deposit accounts, which typically are offered by banks and credit unions, are in
`contrast to investment accounts offered by brokerages and financial services firms.
`contrast to investment accounts offered by brokerages and financial services firms.
`While the funds may be invested in highly liquid assets, the account holder still must
`While the funds may be invested in highly liquid assets, the account holder still must
`notify the institution that they wish to withdraw money; depending on the asset in
`notify the institution that they wish to withdraw money; depending on the asset in
`question, it may take a day or two for the investments to be sold and the cash to be
`question, it may take a day or two for the investments to be sold and the cash to be
`available.
`available.
`
`"DDA" can also mean direct debit authorization, which is a withdrawal from an account
`"DDA" can also mean direct debit authorization, which is a withdrawal from an account
`for purchasing a good or service. It's what happens when you use a debit card. But it's
`for purchasing a good or service. It's what happens when you use a debit card. But it's
`fundamentally the same concept: The money is immediately available, drawn on the
`fundamentally the same concept: The money is immediately available, drawn on the
`linked account, for your use.
`linked account, for your use.
`
`Special Considerations
`Special Considerations
`Demand deposit accounts (DDAs) may have joint owners. Both owners must sign when
`Demand deposit accounts (DDAs) may have joint owners. Both owners must sign when
`opening the account, but only one owner must sign when closing the account. Either
`opening the account, but only one owner must sign when closing the account. Either
`owner may deposit or withdraw funds and sign checks without permission from the
`owner may deposit or withdraw funds and sign checks without permission from the
`other owner.
`other owner.
`
`Some banks create minimum balances for demand deposit accounts. Accounts falling
`Some banks create minimum balances for demand deposit accounts. Accounts falling
`below the minimum value typically are assessed a fee each time the balance drops
`below the minimum value typically are assessed a fee each time the balance drops
`below the required value. However, many banks now offer no monthly fees and no
`below the required value. However, many banks now offer no monthly fees and no
`minimum balances.
`minimum balances.
`
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`Types of Demand Deposit Accounts (DDAs)
`Types of Demand Deposit Accounts (DDAs)
`DDAs are primarily checking accounts, but they can include savings accounts as well.
`DDAs are primarily checking accounts, but they can include savings accounts as well.
`Money market accounts (MMAs) are a bit of a gray area: Some financia l authorities
`Money market accounts (MMAs) are a bit of a gray area: Some financial authorities
`classify them as DDAs, some don't (see Demand Deposit vs. Term Deposit below).
`classify them as DDAs, some don't (see Demand Deposit vs. Term Deposit below).
`
`,
`
`Important: Demand ,deposits make up most of a particular measure of the
`Demand deposits make up most of a particular measure of the
`money supply called M1. M1 equals the sum of all of a nation's demand
`money supply called Ml. Ml equals the sum of all of a nation's demand
`deposits, plus all the currency in circulation. It's a measure of the most liquid
`deposits, plus all the currency in circulation. It's a measure of the most liquid
`types of money in the money supply.
`types of money in the money supply.
`
`As of March 30, 2021, the total amount of demand deposit accounts in the U.S.(cid:173)
`As of March 30, 2021, the total amount of demand deposit accounts in the U.S.—
`officially, the total demand deposits component of Ml-was $3.76 trillion. This
`officially, the total demand deposits component of M1—was $3.76 trillion. This
`compares to $1.1 trillion five years ago and $512 billion 10 years ago. [ll
`compares to $1.1 trillion five years ago and $512 billion 10 years ago.
`1
`
`Demand Deposits: Total
`
`(In billions)
`
`$3,500
`
`3,000
`
`2,500
`
`2 ,000
`
`1,500
`
`1,000
`
`500
`
`0------------------------------
`
`2019
`
`2020
`
`2021
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`2017
`
`2018
`
`Source: Federal Reserve Bank of St. Louis
`
`Get the data • Add this chart to your site
`
`~ lnvestopedia
`
`Requirements for Demand Deposits
`Requirements for Demand Deposits
`The key requirements of DIDAs are no limitations on withdrawals or transfers, no set
`The key requirements of DDAs are no limitations on withdrawals or transfers, no set
`maturity or lockup period, funds accessible on-demand, and no eligibility
`maturity or lockup period, funds accessible on-demand, and no eligibility
`requirements.
`requirements.
`
`The payment of interest and the amount of interest on the DDA are up to the individual
`The payment of interest and the amount of interest on the DDA are up to the individual
`institution. Once upon a time, banks could not pay interest on certain demand deposit
`institution. Once upon a time, banks could not pay interest on certain demand deposit
`accounts. For example, the Federal Reserve Board's Regulation Q (Reg Q) enacted in
`accounts. For example, the Federal Reserve Board's Regulation Q (Reg Q) enacted in
`1933, specifically prohibited banks from paying interest on checking account deposits.
`1933, specifically prohibited banks from paying interest on checking account deposits.
`(Many banks got around that rule via negotiable order of withdrawal (NOW) accounts,
`(Many banks got around that rule via negotiable order of withdrawal (NOW) accounts,
`checking accounts with a temporary holding period on funds, which allowed them to
`checking accounts with a temporary holding period on funds, which allowed them to
`actually pay some interest.) Reg Q was repealed in 2011.
`actually pay some interest.) Reg Q was repealed in 2011.
`
`Still, DDAs tend to pay relatively low-interest rates (on savings accounts) no interest at
`Still, DDAs tend to pay relatively low-interest rates (on savings accounts) no interest at
`all (as is often the case with checking accounts, Reg Q's repeal notwithstanding). They
`all (as is often the case with checking accounts, Reg Q's repeal notwithstanding). They
`may also charge various fees for handling the account.
`may also charge various fees for handling the account.
`
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`Demand Deposit vs. Term Deposit
`Demand Deposit vs. Term Deposit
`A demand deposit account (DDA) and a term deposit account are both types of financial
`A demand deposit account (DDA) and a term deposit account are both types of financial
`accounts offered by banks and credit unions. But they differ in terms of accessibility or
`accounts offered by banks and credit unions. But they differ in terms of accessibility or
`liquidity, and in the amount of interest that can be earned on the deposited funds.
`liquidity, and in the amount of interest that can be earned on the deposited funds.
`
`Basically, a DDA allows funds to be accessed anytime, while a term deposit account(cid:173)
`Basically, a DDA allows funds to be accessed anytime, while a term deposit account—
`also known as a time deposit account-restricts access to funds for a predetermined
`also known as a time deposit account—restricts access to funds for a predetermined
`period. Funds cannot be withdrawn from a term deposit account until the end of that
`period. Funds cannot be withdrawn from a term deposit account until the end of that
`term without incurring a financial penalty, and withdrawals often require written notice
`term without incurring a financial penalty, and withdrawals often require written notice
`in advance.
`in advance.
`
`The most familiar type of term deposit account is the certificate of deposit (CD). You buy
`The most familiar type of term deposit account is the certificate of deposit (CD). You buy
`the CD for a set term or time period-a certain number of months or years-and you
`the CD for a set term or time period—a certain number of months or years—and you
`generally don't touch it until the term is up. It sits in a special account, earning interest
`generally don't touch it until the term is up. It sits in a special account, earning interest
`at a fixed rate.
`at a fixed rate.
`
`That interest is the second big thing distinguishing demand deposits from term
`That interest is the second big thing distinguishing demand deposits from term
`deposits. Term deposits offer interest rates that are generally higher DDAs-much closer
`deposits. Term deposits offer interest rates that are generally higher DDAs—much closer
`to prevailing market rates. Th at's basically the trade-off: In return for the ability to
`to prevailing market rates. That's basically the trade-off: In return for the ability to
`access your funds on demand, your money earns less in a DDA. The time deposit pays
`access your funds on demand, your money earns less in a DDA. The time deposit pays
`more, in compensation for its lack of liquidity.
`more, in compensation for its lack of liquidity.
`
`Where do money market accounts (MMAs) fit into the equation? They're a hybrid: They
`Where do money market accounts (MMAs) fit into the equation? They're a hybrid: They
`let account-holders deposit and withdraw funds on demand and they t ypically pay
`let account-holders deposit and withdraw funds on demand and they typically pay
`market interest rates (it fluctuates). However, they aren't quite as on-demand as regular
`market interest rates (it fluctuates). However, they aren't quite as on-demand as regular
`demand deposit accounts: MMAs typically limit withdrawals or other transactions (like
`demand deposit accounts: MMAs typically limit withdrawals or other transactions (like
`transfers) to six per month. Fees may apply if the limit is exceeded. For these reasons,
`transfers) to six per month. Fees may apply if the limit is exceeded. For these reasons,
`some authorities don't consider money market accounts true DDAs.
`some authorities don't consider money market accounts true DDAs.
`
`* Tip: Federal Reserve Regulation D limits MMA-holders to a total of six
`
`Federal Reserve Regulation D limits MMA-holders to a total of six
`electronic transfers and payments (via check or debit card ) per month.
`electronic transfers and payments (via check or debit card) per month.
`However, depositors ca n make an unlimited number of transfers in person at
`However, depositors can make an unlimited number of transfers in person at
`the bank or at an ATM.
`the bank or at an ATM.
`
`What Does DDA Mean on a Bank Statement?
`What Does DDA Mean on a Bank Statement?
`The acronym DDA stands for "demand deposit account," indicating that fund s in the
`The acronym DDA stands for "demand deposit account," indicating that funds in the
`account (usually a checking or regular savings account) are available for immediate
`account (usually a checking or regular savings account) are available for immediate
`use-on-demand, so to speak. DDA can also stand for "direct debit authorization,"
`use—on-demand, so to speak. DDA can also stand for "direct debit authorization,"
`meaning a transaction, such as a transfer, cash withdrawal, bill payment, or purchase,
`meaning a transaction, such as a transfer, cash withdrawal, bill payment, or purchase,
`which has immediately subtracted money from the account.
`which has immediately subtracted money from the account.
`
`What Is a Consumer DDA Account?
`What Is a Consumer DDA Account?
`A consumer DDA is a demand deposit account. Such an account lets yo u w ithdraw
`A consumer DDA is a demand deposit account. Such an account lets you withdraw
`funds without hav ing to give the financial institution any advance notice.
`funds without having to give the financial institution any advance notice.
`
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`What Is the Difference Between Demand Deposits and
`What Is the Difference Between Demand Deposits and
`Time Deposits?
`Time Deposits?
`Demand deposits consist of funds the account holder can access right away: They are
`Demand deposits consist of funds the account holder can access right away: They are
`available anytime. The funds in a checking or regular savings account usually consist of
`available anytime. The funds in a checking or regular savings account usually consist of
`demand deposits.
`demand deposits.
`
`In contrast, time deposits, aka term deposits, are not immediately at the account
`In contrast, time deposits, aka term deposits, are not immediately at the account
`holder's disposal. They are funds that have been deposited with the understanding that
`holder's disposal. They are funds that have been deposited with the understanding that
`they will remain untouched for a certain specified period of time—months or even
`they will remain untouched for a certain specified period of time-months or even
`years. Certificates of deposit (CDs) are a common type of time deposit.
`years. Certificates of deposit (CDs) are a common type of time deposit.
`
`What Are the Advantages of Demand Deposit Accounts
`What Are the Advantages of Demand Deposit Accounts
`(DDAs)?
`(DDAs)?
`With demand deposit accounts (DDAs), your money is completely at your disposal. You
`With demand deposit accounts (DDAs), your money is completely at your disposal. You
`can withdraw the funds in form of the cash or to pay for something (using a debit card
`can withdraw the funds in form of the cash or to pay for something (using a debit card
`or online transfer) at any time, without giving the bank notice or incurring a penalty, or
`or online transfer) at any time, without giving the bank notice or incurring a penalty, or
`paying fees.
`paying fees.
`
`So DDAs are ideal to meet everyday expenses, make mundane purchases, or pay regular
`So DDAs are ideal to meet everyday expenses, make mundane purchases, or pay regular
`bills. They offer the utmost convenience for getting cash or transferring funds to
`bills. They offer the utmost convenience for getting cash or transferring funds to
`another account or another party.
`another account or another party.
`
`The Bottom Line
`The Bottom Line
`Offered by banks and cred it unions, demand deposit accounts allow you to deposit to
`Offered by banks and credit unions, demand deposit accounts allow you to deposit to
`and withdraw funds immediately, whenever you want-"on-demand," in effect. The
`and withdraw funds immediately, whenever you want—"on-demand," in effect. The
`financial institution can't require advance notice or charge a fee for letting you access
`financial institution can't require advance notice or charge a fee for letting you access
`the funds. Ideal for frequent or everyday needs. DDAs usually take the form of checking
`the funds. Ideal for frequent or everyday needs. DDAs usually take the form of checking
`or savings accounts.
`or savings accounts.
`
`The main drawback of DDAs is that they offer little or no interest in the money in them.
`The main drawback of DDAs is that they offer little or no interest in the money in them.
`That's the price you pay for the funds being readily available.
`That's the price you pay for the funds being readily available.
`
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`EVERI EX. 1027; Page 5
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`accurate, unbiased content in our editorial policy.
`accurate, unbiased content in our editorial policy.
`
`1. St. Louis Fed. "Demand Deposits: Total, https://fred.stlouisfed.org/ series/W DDNS."
`St. Louis Fed. " Demand Deposits: Total
`."
`Accessed March 30, 2021.
`Accessed March 30, 2021.
`
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