A deposit account is a current account A transactional account is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts, savings account Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return, or other type of bank account, at a banking A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services institution that allows money Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future for the bank, and represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is on the funds deposited.
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Major types
- Checking accounts A transactional account is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts: A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts.
- Savings accounts Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return: Accounts maintained by retail banks that pay interest Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return.
- Money market deposit account A money market account is a deposit account with a relatively high rate of interest, and short notice required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit.
- Time deposit A time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.
Legal framework
Although restrictions placed on access depend upon the terms and conditions of the account and the provider, the account holder retains rights to have their funds repaid on demand. The customer may or may not be able to pay the funds in the account by cheque A cheque or check is a negotiable instrument[nb 1] instructing a financial institution to pay a specific amount of a specific currency from a specified demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities, internet banking, EFTPOS EFTPOS is the general term used for debit card based systems used for processing transactions through terminals on points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments in those countries or other channels depending on those provided by the bank and offered or activated in respect of the account.
The banking terms "deposit" and "withdrawal" tend to obscure the economic substance and legal essence of transactions in a deposit account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds (whether cash or checks) themselves, which are shown an asset In financial accounting, assets are economic resources owned by business or company. Anything tangible or intangible that one possesses, usually considered as applicable to the payment of one's debts is considered an asset. Simplistically stated, assets are things of value that can be readily converted into cash . The balance sheet of a firm of the bank. For example, a depositor opening a checking account at a bank in the United States with $100 in currency surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system The double-entry bookkeeping system refers to a set of rules to record financial information in a financial accounting system wherein every transaction or event impacts at least two different accounts. In modern accounting this is done using debits and credits, and serves as a kind of error-detection system: if, at any point, the sum of debits.) In the audited financial statements of the bank, on the balance sheet, the $100 in currency would be shown as an asset of the bank on the left side of the balance sheet, and the deposit account would be shown as a liability owed by the bank to its customer, on the right side of the balance sheet. The bank's financial statement reflects the economic substance of the transaction -- which is the bank has actually borrowed $100 from its depositor and has contractually obliged itself to repay the customer according to the terms of the demand deposit account agreement. To offset this deposit liability, the bank now owns the actual, physical funds deposited, and shows those funds as an asset of the bank.
Typically, an account provider will not hold the entire sum in reserve, but will loan the money at interest to other clients, in a process known as fractional-reserve banking Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks lend out any fraction of the funds received from deposit. It is this process which allows providers to pay out interest on deposits.
By transferring the ownership of deposits from one party to another, they can replace physical cash as a method of payment. In fact, deposits account for most of the money supply In economics, money supply or money stock, is the total amount of money available in an economy at a particular point in time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits in use today. For example, if a bank in the United States makes a loan to a customer by depositing the loan proceeds in the customer's checking account, the bank typically records this event by debiting an asset account on the bank's books (called loans receivable or some similar name) and credits the deposit liability or checking account of the customer on the bank's books. From an economic standpoint, the bank has essentially created economic money (although obviously not legal tender Legal tender or forced tender is an offered payment that, by law, cannot be refused in settlement of a debt, and have the debt remain in force. Currency is the most common form of legal tender). The customer's checking account balance has no dollar bills in it, as a demand deposit account is simply a liability owed by the bank to its customer. In this way, commercial banks are allowed to increase the money supply (without printing currency, or legal tender).
Regulatory protection
Main article: Banking regulation Bank regulations are a form of government regulation which subject banks to certain requirements, restrictions and guidelinesBanks A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services are normally subject to prudential regulation Bank regulations are a form of government regulation which subject banks to certain requirements, restrictions and guidelines which has the purpose of reducing the risk of failure of the bank. It may also have the purpose of reducing the extent of depositor losses in the event of bank failure.
Main article: Deposit insurance Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stabilityBank deposits may also be insured by a deposit insurance Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability scheme, if applicable.
See also
- Fractional-reserve banking Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks lend out any fraction of the funds received from deposit
- Sweep account A sweep account is an account set up at a bank or other financial institution where the funds are automatically managed between a primary cash account and secondary investment accounts
- Demand Deposit A demand deposit or bank money refers to the funds held in demand deposit accounts in commercial banks. These account balances are considered money and usually form the greater part of money supply
Categories: Banking terms and equipment
Wall Street Journal
"But if you're a three-store coffee shop or boutique, you're going to be a price taker; you're going to pay statement fees, deposit fees and the like," he ...
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Rajeev
Wed, 24 Feb 2010 11:42:55 GM
Assignment to a creditor of . deposit account. as security for monies owing to the creditor. This form includes special formatting features to assist you in completing the agreement. Category : Security, Priority & Subordination Agreements ...
Q. ..amount from Deposit account. My SBI internet banking account is applicable for my main account where I am staying.I also have another SBI SB account at my native place and one SB account in State Bank of Mysore,Hyderabad Branch.Can I include these two accounts also with my main internet banking account ?
Asked by ccc - Sat Nov 22 12:23:43 2008 - - 3 Answers - 0 Comments
A. You should always contact your bank directly with any questions regarding your accounts. They are the best ones to assist you. Good luck.
Answered by Andrea - Sat Nov 22 13:31:34 2008
