Demand deposits are a type of bank account where the deposited funds can be withdrawn at any time without advance notice. They are also known as current deposits or checking accounts. Here are some key features of demand deposits:
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Accessibility: Demand deposits are highly liquid and can be accessed by the account holder at any time through methods like checks, debit cards, and online transfers.
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No maturity period: Demand deposits have no maturity period or an original maturity of six days or less. This means that the funds can be withdrawn at any time without penalty.
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No interest: Demand deposits typically do not bear interest. This is because the bank can use the funds to make loans or investments, and they need to keep a certain amount of funds on hand to meet withdrawal demands.
Demand deposits are intended to provide ready money that people need to make purchases or pay bills. They are different from investment accounts offered by brokerages and financial services firms, where the funds may be invested in highly liquid assets, but the account holder still needs to notify the institution that they wish to withdraw money.
