What it is:
How it works/Example:
There are two general types of bank deposits: demand deposits and time deposits. Demand deposits are the placement of into an account that allows the depositor to withdraw his or her from the account without warning or with less than seven days' notice. Checking accounts are demand deposits. They allow the depositor to withdraw at any time, and there is no limit to the number of transactions a depositor can have on these accounts (although this does not that the bank cannot charge a fee for each transaction).
A deposit held by a bank or financial institution for a fixed term whereby the depositor can withdraw the only after giving notice. Time deposits generally refer to savings accounts or certificates of deposit, and banks and financial institutions usually require 30 days' notice for withdrawal of these deposits. Individuals and companies often consider time deposits as "cash" or readily available even though they technically are not payable on demand. The notice requirement also means that banks may assess a penalty for withdrawal before a specified date. Time deposits may pay higher interest rates than demand deposits.is an interest-bearing
Why it matters:
Bank deposits are a fundamental way money moves through an economy. Some bank deposits at commercial banks (demand deposits) are part of the M1 money supply (a country's physical currency plus demand deposits and other liquid assets held by the central bank) calculated by the Federal Reserve. Time deposits below $100,000 are included in the Federal Reserveâs M2 money supply measure (M1 plus savings accounts, generally), and time deposits above $100,000 are included in the M3 money supply. The Federal Reserve currently does not place reserve requirements on savings deposits and CDs, but the amount of demand deposits an institution has often dictates all or part of the reserves it must keep on hand either in vault cash or on deposit with the Federal Reserve; the more dollars an institution has in demand deposits, the more dollars it must keep in reserves.