A cash deposit is the money that a person puts into their bank account or savings account. The bank then has a liability to keep the money safely and pay it back on the terms agreed for that account. Cash deposits can be money transfers or cheques deposited in an account and dont only have to be cash. When a person deposits money into the bank, it becomes an asset of the bank, but the account it is in is a liability. Different types of accounts give different rights of access to the money deposited. For example, in a term account, a person might give up the right to take their money out for several years.
Money market accounts are a type of savings account that pay interest, but some issuers offer account holders limited rights to occasionally withdraw money or write checks against the account. Withdrawals are limited by federal regulations, and if they are exceeded, the bank promptly converts it to a checking account. Banks typically calculate interest on a money market account on a daily basis and make a monthly credit to the account. Given todays high-interest rate market, money market accounts have become more popular because of their perceived safety when compared to more volatile investments, such as stocks. Funds in money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) at banks and the National Credit Union Administration (NCUA) in credit unions.
Institutions that participate in the money market include banks that lend to one another and to large companies in the eurocurrency and time deposit markets; companies that raise money by selling commercial paper into the market, which can be bought by other companies or funds; and investors who purchase bank CDs as a safe place to park money in the short term. The money market is crucial for the smooth functioning of a modern financial economy. It allows savers to lend money to those in need of short-term loans and allocates capital towards its most productive use.
