Everything You Need To Know About Bank Deposits

Find out what happens to the money you put in the bank.

Whether you have your paycheck directly deposited or you carry a jarful of pennies into the bank, how much do you really know about bank deposits? Learn what happens to the money you put in the bank and find out how you can get it out when you need it. Hint: It might not be as easy as you think.

Here’s what you’ll find in this guide to bank deposits:

What Are Bank Deposits?

When you deposit money into a financial institution, you give the institution use of your money in exchange for its promise to pay you back. Bank deposits are assets to you and liabilities to the bank.

There are several different types of deposit accounts, but just two main types of bank deposits:

  • Demand deposits
  • Time deposits

Whereas a demand deposit generally requires the bank to return your money upon “demand,” time deposit accounts can require advance notice for withdrawals.

Keep reading to find out about the different types of bank deposits that are available.

Understanding the Types of Bank Deposits

Deposits might be treated a little differently depending on the type of bank account you have. Here’s an at-a-glance look at the types of bank deposit accounts available and how each handles deposits:

Types of Deposit Accounts
Deposit AccountCharacteristics
Checking AccountUsed for daily expenses and bills; account holders can write checks for funds in the account
Share Draft AccountChecking account from a credit union
Money Market AccountDeposit account that earns interest and limits the number of transactions each month
Savings AccountUsed for saving money for emergencies or a specific goal; typically earns interest
Certificate of DepositUsed for long-term savings; interest rates are higher than a savings account’s, but early withdrawal might incur a penalty

Current Accounts and Checking Accounts

A checking account — also known as a current account in some parts of the world — is a demand deposit account. You can withdraw money from this type of account by going to the bank or by writing a check to yourself or to someone else. When the bank receives the check, it provides the funds to the person whose name is on the check. You can also use a debit card to make purchases, the cost of which will be deducted from your account by the merchant.

Note that checking accounts aren’t the only accounts that let you write checks. You can also write checks on money market accounts, home equity lines of credit and other credit line accounts. An additional type of checking account is a NOW account, which stands for negotiable order of withdrawal. A NOW account pays interest and can require that you provide seven days’ notice for withdrawals, although most banks don’t require this.

Money from a cash deposit into your account is available for immediate withdrawal. When you deposit a check, the bank might hold the check for several days before the funds can be withdrawn, but the first $200 of the deposit is usually available the next business day and the rest of the deposit the day after that. Each bank has its own rules, so check with your bank for its requirements.

Credit unions sometimes refer to their checking accounts as share draft accounts. These accounts are a form of ownership, as members are owners of a credit union. By contrast, checking account holders are customers of the bank, not owners.

Find Out: How Long Does It Take to Have a Payment Post Online to Your Bank?

Savings Accounts

A savings account is a demand account that typically earns interest. When you deposit money into a savings account, it earns interest based on the balance in the account each day, and the interest is credited to your account each month. Savings accounts are used to save money for an emergency or for long-term goals. You might be limited as to the number of transactions you can make in your savings account each month.

Learn: How To Deposit Cash to an Online Bank Account

Certificates of Deposit

A certificate of deposit, or CD, is a time deposit account. When you open a CD, you select a term specifying how long you will keep the money on deposit at the bank. Money kept in the bank longer typically earns a higher rate of interest. On the maturity date, which is the end of the term, the bank returns the money along with the amount of interest agreed to when you opened the account. You might have to pay a penalty if you withdraw the money before the maturity date.

The Ultimate CD Guide: Investing In Certificates of Deposit

Money Market Accounts

A money market account is a deposit account that can be used as a savings account with limited check writing and debit card privileges. Deposits into a money market account are time deposits because the bank can require six days’ notice for withdrawals, although few banks do this. A money market account’s main advantage is that it features a higher interest rate than a typical savings account. Although most money market accounts limit you to six withdrawals or checks per month, ATM, in-person and phone transactions are usually exempt. A money market account is different from a money market fund, which is an investment and could lose money.

See: This Is How Long It Takes for a Check to Clear at Your Bank

Bank Deposit Insurance

Most bank deposits are insured by the Federal Deposit Insurance Corporation, so make sure your bank offers this important protection. This independent agency of the U.S. government protects the money you deposit in a bank. Since the FDIC was established in 1933, no depositor has lost any FDIC-insured funds. Up to $250,000 per person per bank is insured, so if your deposits total more than that, it’s best to split them up so that you have no more than $250,000 at any one bank.

Credit unions offer similar insurance from the National Credit Union Administration or NCUA. The NCUA administers the National Credit Union Share Insurance Fund, or NCUSIF, which is backed by the full faith and credit of the U.S. government. A $250,000 limit per person per credit union applies to NCUA-insured funds.

Who Insures Credit Unions and Banks? NCUA vs. FDIC

Bottom Line on Bank Deposits

Whether you walk into a branch or use online banking, bank deposits are a good way to keep your money safe and earn a little interest. By depositing money in the bank, you ensure it will always be there when you need it — even if you have to wait a few days to get it.

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