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Demand Deposit: Definition & Overview

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Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

A Demand Deposit Account (DDA) is a bank account from which deposited funds can be withdrawn at any time, without advance notice. Many checking and savings accounts are examples of demand deposit accounts. Further explore the definition of a DDA and receive an overview of demand deposit by definition, manner of demand, and Federal Reserve Criteria. Updated: 10/14/2021

What Is Demand Deposit?

A demand deposit is money that you deposit into a bank account from which you can withdraw on demand, at any time without any advance notice to the bank. Common examples of accounts that are often demand deposit accounts include many checking and savings accounts. Keep in mind, however, that not all checking accounts and savings accounts are demand deposit accounts.

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  • 0:00 What Is Demand Deposit
  • 0:26 Manner of Demand
  • 1:01 Federal Reserve Criteria
  • 2:54 Lesson Summary
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Manner of Demand

There are many ways you can make a demand on your bank for the funds deposited in a demand deposit account. You can make your demand upon the bank through a bank teller, from an ATM, via your debit card, through online banking transfers and by drawing a check. In fact, if you look closely at a check, you'll see the words 'pay to the order of' right before the line where you fill in the name of the person you're paying. You are actually demanding that the bank pay the sum of money indicated on the check to the payee identified on the check. Now let's look at how the Federal Reserve regulates these types of accounts.

Federal Reserve Criteria

The Federal Reserve has created its own criteria for demand deposit accounts under its Regulation D, regarding reserve requirements. A reserves requirement is the amount of deposits that a bank is required to hold in reserves and not loan out. After all, since money held in demand deposit accounts must be paid on demand, it is important that there are sufficient reserves to handle the normal volume of demand. It is also important to clearly define what a demand deposit account is so that banks can comply.

According to Regulation D, 'Demand deposit accounts are payable on demand, or a deposit issued with an original maturity or required notice period of less than seven days, or a deposit representing funds for which the depository institution does not reserve the right to require at least seven days' written notice of an intended withdrawal. There are no eligibility restrictions on this type of account.'

So what does all that legalese mean? It basically means that an account is a demand deposit account if:

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