A deposit account is an account at a banking institution that allows money to be held on behalf of the account holder. Some banks charge a fee for this service, while others may pay the client interest on the funds deposited.

The account holder retains rights to their deposit, although restrictions placed on access depend upon the terms and conditions of the account and the provider.

A deposit is a type of asset.

Typically, an account provider will not hold the entire sum in reserve, but will loan the money out at interest to other clients, in a process known as fractional-reserve banking. It is this process which allows providers to pay out interest on deposits.

By transferring the ownership of deposits from one party to another, they can replace physical cash as a method of payment. In fact, deposits account for most of the "money supply" in use today.

Regulatory protection

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In the United States, all deposits up to $100,000 are insured by the Federal Deposit Insurance Corporation. In the United Kingdom all banks and building societies which are licensed by the Financial Services Authority are covered by a compensation scheme with a maximum pay out of £31,700 per person.

Types of deposit account

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There are different types of deposit account, varying by their conditions of withdrawal. Common types are:

• Savings deposit
  • Money market deposit account (MMDA)
• Time deposit
  • Certificate of deposit
  • Small-denomination time deposit
  • Large-denomination time deposit
• Transaction deposit
  • Checkable (checking) deposit
    • Demand deposit
    • Automatic transfer service (ATS) deposit
    • Negotiable order of withdrawal (NOW) deposit
  • Current account

See also

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• Fractional-reserve banking
• Full-reserve banking

Banking terms and equipment

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