Question

In: Accounting

Please DISCUSS The types of demand deposits Please give an example from each one

Please DISCUSS

  • The types of demand deposits
  • Please give an example from each one

Solutions

Expert Solution

Three main types of Demand Deposits

Checking Account: Checking accounts are the most common and easy to use Demand Deposit product. It allows easy access to cash by withdrawing it anytime from ATMs, Bank’s Teller, Debit Cards and by writing cheques provided by the bank.

Current account - Usually opened by businessmen for their business transactions. Amount in the account doesn't earn any interest. Flexible deposit and withdrawals.

Money Market Accounts: It is another type of demand deposit which are purely based upon market interest rates based upon macro variable factors as determined by the central bank of a country, as the interest rates fluctuate on a daily basis it becomes very unpredictable as sometimes it offers more interest than savings accounts and sometimes lesser.

Other types of deposits are:-

1. Savings account - Usually opened by working-class people, students, etc. The amount in the account earns interest @ 3.5–4%. Flexible Deposit and withdrawals.

2. Recurring deposit - Money can be deposited at regular intervals ( like monthly, quarterly). This money is kept for a fixed period of time and can be withdrawn only on maturity. The interest earned is more than savings account but less than Fixed Deposit.

3. Fixed Deposit/ Term Deposit accounts - Money can be deposited only once. This money will be kept for a fixed period and can be withdrawn only on maturity. The interest earned will be the highest among all categories of account. If you want to withdraw money before maturity then you will be charged a penalty.


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