Demand deposit

A demand deposit is cash left in a bank account that the depositor can withdraw at any time, without giving prior notice to the bank. Demand deposits have the following characteristics:

  • Funds are payable on demand

  • Funds can be interest bearing

  • No eligibility requirements

  • No limit on the number of withdrawals or transfers

  • No maturity period

Consumers and businesses park much of their funds in demand deposits in order to pay for their ongoing, daily expenses. Checking accounts and some savings accounts are considered to have demand deposit characteristics. 

Demand deposits are part of the M1 classification of the national money supply, and comprise a large proportion of the total money supply. A large part of the reserves that banks are allowed to maintain are associated with the demand deposits held by their customers.

Related Courses

Corporate Cash Management 
Corporate Finance 
Treasurer's Guidebook