Demand Deposit
Deposits made into different demand deposit accounts, also known as DDAs, are referred to as demand deposits. They allow withdrawals anytime without prior notice and offer a nominal interest rate. These accounts help meet daily financial needs, though withdrawal limits may apply.
The maximum limit could either be the accountholder’s balance or a daily limit. Demand deposit accounts such as a savings account or a checking account can be opened jointly. These accounts allow both account holders to withdraw money at any time. However, note that demand deposits are not the same as term deposits. In the case of term deposits, depositors have to wait until the specified lock-in period ends before requesting a withdrawal.
Types of Demand Deposits
The various types of demand deposit accounts are mentioned below:
1. Savings Account
A savings account is a popular type of demand deposit that allows you to deposit money for long-term and earn interest. It has a low minimum balance requirement, allowing nearly everybody to open a savings account.
2. Money Market Account
A deposit account that pays interest according to the present rates of interest in the money markets is known as a money market account (MMA). The economic activities of central banks determine market interest rates. These accounts usually receive higher interest rates compared to savings accounts and transaction accounts.
3. Checking Account
A checking account is a type of demand deposit that provides high liquidity, enabling withdrawals of funds whenever needed. These accounts either have small interest earned or none at all. The interest is determined by the lender. Unlike savings accounts, which are intended for long-term use, checking accounts are typically for a brief period of time.
Features of Demand Deposit
The main features of a demand deposit are highlighted below:
- You can withdraw money from a demand deposit as and when needed.
- As a demand deposit accountholder, you get the authority to issue a cheque whenever necessary.
- For demand deposit accounts, some financial institutions have minimum balance requirements.
- You can open a joint account that allows both owners to make deposits and withdrawals.
- The interest earned on a demand deposit is lower than that of a term deposit.
- No matter how many times you withdraw money from a demand deposit account, you won’t be charged any fee.
- This type of account offers high liquidity.
- Demand deposits also allow you to transfer funds digitally.
Benefits of Demand Deposit
The benefits of a demand deposit account are as follows:
- Demand deposits are popular because they can be used to make day-to-day transactions.
- You have instant access to cash and can withdraw funds to meet your needs.
- There are no fees associated with such withdrawals.
- You can open a demand deposit in joint names.
- You don't need to request permission for withdrawing funds or inform the bank beforehand.
FAQs on Demand Deposit
- What is a demand deposit?
A demand deposit is a type of bank account that allows individuals to withdraw money without having to inform the bank.
- What are the various types of demand deposits?
The three main types of demand deposits are savings accounts, money market accounts, and checking accounts.
- Do I have to pay a fee for withdrawing money from my demand deposit?
No, you can withdraw money from your demand deposit without paying any charges.
- Can I transfer money digitally through my demand deposit account?
Yes, demand deposit accounts can also be used to make electronic transfers.
- Can I open a demand deposit account in joint names?
Yes, you can open a demand deposit account in joint names.
- Can I open a demand deposit account in a non-banking financial company (NBFC)?
No, demand deposits are currently only accessible through banks. According to the Reserve Bank of India, NBFCs are not allowed to accept demand deposits.
- What is the difference between a demand deposit and a term deposit?
You can withdraw from a demand deposit anytime, while term deposits allow withdrawals only at maturity. Demand deposits may have maintenance fees and lower interest, whereas term deposits usually have no extra fees and offer higher interest.
- How can I check the balance in my demand deposit?
You can check the balance in your demand deposit via internet banking, mobile banking, or at an ATM. Alternatively, you can visit the bank branch or reach out to their customer service.
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