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Deposit Accounts

This guide explores two main categories of deposit accounts: transaction accounts and time deposits. Transaction accounts, such as demand deposits and checking accounts, offer flexible access to funds, facilitating everyday transactions. We delve into basic checking accounts, interest-bearing options, and other transaction solutions like travelers’ checks. Time deposits, including savings accounts, money market deposits, and certificates of deposit (CDs), offer higher interest rates but come with restrictions on liquidity. Learn about the features, benefits, and typical requirements for each account type in your area.

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Deposit Accounts

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  1. Deposit Accounts

  2. Two Categories: • Transaction deposits • An account that allows transactions to occur at any time and in any number. AKA demand deposits • Time deposits • Deposits held for or mature at a specified time.

  3. Transaction Accounts • Demand Deposits- payable on demand whenever the depositor chooses • Checking Account - most common form; offers customers quick access to their money and a convenient way to pay bills or transfer funds to other institutions.

  4. Checking Accounts • Basic- Offer a few simple services for minimal cost • Interest bearing checking- Pay interest on the balance deposited in the account, but usually a minimum balance is required

  5. Other types of transaction accounts • Travelers checks • Automatic transfer service

  6. Time Deposits • Less liquid than check deposits • Examples include: • Savings Accounts • Money Market deposit accounts • Certificates of Deposit (CDs) • Various Savings Bonds

  7. Savings Accounts • Banks usually limit the number of free withdrawals. • Statement Savings Accounts: • Provide a quarterly statement detailing account activity, including fees and interest earned. • Lower interest rates than other time deposits because it is the most liquid

  8. Money Market Deposit Accounts • MMDAs offer a higher rate of interest than savings accounts, but they usually require a higher initial deposit to open an account. • FDIC insured up to $250,000 • Minimum balance usually required • # of Transactions may be restricted

  9. Certificates of Deposit • CDs are certificates offered by the bank that guarantee payment of a specified interest rate until a designated date in the future (maturity date). • Higher the amount and longer time until maturity = higher interest rates • Usually higher than money market accounts and savings accounts

  10. Assignment • In groups of 3, research the various types of transaction accounts and time deposits offered at a bank in your area. • Provide details about each type of account • Research should be summarized on a PowerPoint, a flyer, or brochure.

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