Savings, Demand, and Time Deposits - Explained
What are Savings, Demand, and Time Deposits?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What are Savings Deposits?
A savings deposit, otherwise known as a passbook savings account, a statement savings account, or as a money market deposit account, is a deposit or account which, under the terms of the deposit contract or by practice of the depository institution, the depositor may be permitted or authorized to make transfers and withdrawals to another account (including a transaction account) of the depositor at the same institution or to a third party, regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.
What Are Time Deposits?
Time deposit accounts are savings accounts that require you to keep your money in the account for a set time frame. They can also be called term deposit accounts or term deposits since the bank can specify the term that the money must stay in place.
If you’d like to withdraw money before the term ends, the bank may allow that. However, they will likely charge you a penalty fee. They may also require you to give them a certain amount of advance, either in writing, in-person, or over the phone. Once you open a time deposit account, you typically can’t add any additional funds at a later date.
Your money is effectively locked in for a set time period or term. During this term, your money can earn interest at a rate specified by the bank.
An example of a time deposit is a certificate of deposit or CD.
What Are Demand Deposits?
With a demand deposit account, you are allowed to put money into the account or take money out of the account when you want and without giving any advance notice. Demand deposit accounts include checking accounts, savings accounts, or money market accounts.
The money in a demand deposit account is generally considered to be liquid, or ready cash, and you can withdraw any amount (including the entire balance) at any time without paying a penalty. However, some banks may charge a fee if you exceed a certain number of withdrawals from a savings account within one month.
Demand deposit accounts work by allowing you convenient, flexible access to your money. The most common example of a demand deposit account is a checking account. With a checking account, you can deposit money, then access it by:
• Using a debit card to make purchases online or in stores
• Withdrawing cash at ATMs or through a teller
• Scheduling online bill payments
• Linking it to mobile payment apps
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