What is a Time Deposit?
A time deposit is an interest-bearing deposit held by a bank or financial institution for a fixed term whereby the depositor can only withdraw theafter giving notice.
How Does a Time Deposit Work?
Time deposits generally refer to savings accounts or certificates of , and banks and financial institutions usually require 30 days notice for withdrawal of these .
Why Does a Time Deposit Matter?
Individuals and companies often consider time deposits as, or readily available , even though they are technically 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 such as checking or accounts, which allow withdrawals at any time. The Federal Reserve currently does not place reserve requirements on savings and CDs.
Timebelow $100,000 are included in the Federal Reserve's M2 supply measure, and time above $100,000 are included in the M3 supply.