7915 / What forms of deposits or other services are available in banks and other financial institutions?

Although the varieties of savings vehicles and services available through banks and other financial institutions seem endless, they may generally be grouped into one of four categories, as follows: (1) demand deposits; (2) time deposits; (3) savings deposits; or (4) life insurance and annuities.

A demand deposit is a deposit of funds that is payable on demand and generally includes all deposits that are not “time deposits” or “savings deposits.” With some exceptions, demand deposits do not pay interest.

A time deposit is a deposit of funds that the depositor does not have a right to withdraw for a specified period following the date of the deposit. Time deposits include deposits payable on a specified future date, after the expiration of a specified period of time, on written notice given a specified number of days prior to payment, or, as in the case of Christmas clubs and similar clubs, after a certain number of periodic deposits have been made during a specified minimum period of time. Time deposits may be evidenced by certificates of deposit (CDs), passbooks, statements, or otherwise. Time deposits evidenced by certificates of deposit are usually payable only on presentation of the certificate.

A savings deposit is generally any deposit of funds that is not payable on a specified date or at the expiration of a specified period of time. Money in a savings deposit may usually be withdrawn at any time; however, a financial institution may require that an advance written notice be given prior to a withdrawal. A savings deposit may be subject to “negotiable orders of withdrawal” (i.e., a NOW account).

In addition, banks and other financial institutions may make life insurance and annuities available to individual investors, subject to certain restrictions.¹