Deposit Accounts Created By: Laura Kinchen

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.

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.

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

Other types of transaction accounts  Traveler’s checks  Automatic transfer service  Money Supply: M1 and transaction accounts are the same!

Time Deposits  Less liquid than checkable deposits; not currently subject to the Fed’s reserve requirements  Examples include: Savings Accounts Money Market deposit accounts Certificates of Deposit (CDs) Various bonds

Savings Accounts  Banks may require up to a 7-day notice to withdraw funds  Statement Savings Accounts: Provide a monthly or quarterly statement detailing account activity, including fees and interest earned. Lower interest rates than other time deposits because it is the most liquid

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 $100,000  Minimum balance usually required  # of Transactions may be restricted

Certificates of Deposit  CDs are certificates offered by the bank that guarantees 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

Assignment  In groups of 4, research the various types of transaction accounts and time deposits offered at one of eight banks.  Provide details about each type of account  Research should be summarized in a PPT slide