Demand Deposits

Published Dec 27, 2022

Definition of Demand Deposits

Demand deposits are bank accounts that allow customers to withdraw their money at any time without prior notice. That means customers can access their funds whenever they need them, without having to wait for the bank to process the transaction.

Example

To illustrate this, let’s look at a simple example. Chances are, you have a checking account at your local bank that allows you to withdraw money with a debit card. This account is considered a demand deposit because you can withdraw your money at any time without prior notice. In addition to that, you can also use it to make payments, transfer funds, and write checks.

Why Demand Deposits Matter

Demand deposits are an important part of the banking system. They provide customers with the flexibility to access their funds whenever they need them. This is especially important in times of financial hardship when customers need to access their money quickly.

Demand deposits also provide banks with a steady source of income. Banks can use the funds deposited in demand deposits to make loans and investments, which generate interest income. This helps them to remain profitable and provide customers with the services they need.