how bank deposits work
the deposit itself is a liability owed by the bank to the depositor bank deposits refer to this liability rather than to the actual funds that have been deposited when someone opens a bank account and makes a cash deposit they surrender the legal title to the cash and it becomes an asset of the bank in turn the account is a liability to the bank types of bank depositsa current account also called a demand deposit account is a basic checking account consumers deposit money and the deposited money can be withdrawn as the account holder desires on demand these accounts often allow the account holder to withdraw funds using bank cards checks or over the counter withdrawal slips in some cases banks charge monthly fees for current accounts but they may waive the fee if the account holder meets other requirements such as setting up direct deposit or making a certain number of monthly transfers to a savings account there are several different types of deposit accounts including current accounts savings accounts call deposit accounts money market accounts and certificates of deposit cds frequently banks will have after hours or night depository lock boxes that allow businesses to deposit cash and check receipts outside of normal banking hours savings accounts offer account holders interest on their deposits however in some cases account holders may incur a monthly fee if they do not maintain a set balance or a certain number of deposits although savings accounts are not linked to paper checks or cards like current accounts their funds are relatively easy for account holders to access in contrast a money market account offers slightly higher interest rates than a savings account but account holders face more limitations on the number of checks or transfers they can make from money market accounts financial institutions refer to these accounts as interest bearing checking accounts checking plus or advantage accounts these accounts combine the features of checking and savings accounts allowing consumers to easily access their money but also earn interest on their deposits like a savings account a time deposit account is an investment vehicle for consumers also known as certificates of deposit cd time deposit accounts tend to offer a higher rate of return than traditional savings accounts but the money must stay in the account for a set period of time in other countries time deposit accounts feature alternative names such as term deposits fixed term accounts and savings bonds deposit insurancethe federal deposit insurance corporation fdic provides deposit insurance that guarantees the deposits of member banks for at least 250 000 per depositor per bank member banks are required to place signs visible to the public stating that deposits are backed by the full faith and credit of the united states government credit unions are insured by the national credit union association ncua for up to 250 000 as well 12