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 demand deposit accounts include current and savings bank accounts. The demand deposits are a type of fund that provides money to an individual for paying daily expenses. The money that is deposited at the bank can be withdrawn as per the requirement of the depositor. Amounts that are lying in the savings and current accounts are known as demand deposits, as they can be used at any point of time.
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There are two types of demand deposits. They are current account and savings account. They are discussed below:
Current account: A current account is always a demand deposit. A current account functions in a manner where the bank is obliged to pay the money on the depositor’s demand. The current account bears no interest. The current account facilitates the easy operation of the account to an individual or a firm.
Current accounts are normally used to hold short-term funds that are used to pay for transactions involving goods and services and to obtain easy access to cash when needed.
Savings account: This is the second type of demand deposit. Unlike the current account, a savings account receives interest which is usually at a fixed rate set by the bank in which the account exists. These accounts are used to hold funds that a customer can avail in times of need, in the short term. Savings account does not have the facility of giving funds using cheques. The funds can be withdrawn by a customer at a bank branch or an ATM. Many banks offer the facility of transferring funds between savings and current accounts.
The Deposits in the bank accounts which are payable on demand are called demand deposits. Some of the salient features of demand deposits are listed below:
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An account from which deposited funds can be withdrawn at any point of time without any notice is known as demand deposit account. On the other hand we can say that the deposit which may be allowed or withdrawn on demand is called Demand Deposit.
The importance of demand deposit is as follows:
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The advantages of demand deposits are as follows:
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