Demand Deposit
IntermediateA demand deposit is money held in a bank account that can be withdrawn at any time, without advance notice or penalty, such as the balance in a current or checking account.
Demand deposits are designed for everyday use. Account holders can withdraw cash, pay by card, write cheques or transfer money whenever they need to.
Because the bank must be ready to pay out these funds at any time, demand deposits usually pay little or no interest. Their main value is convenience and access.
For example, the money in your current account that you use for paying rent, groceries and bills is a demand deposit. If you have 1,500 in the account, you can spend all of it today if you choose.
Demand deposits are a major part of the money supply in modern economies, because they can be used directly for payments. Central banks include them in narrow measures of money. For banks, they are a relatively cheap source of funding, but they can be withdrawn quickly, which is why banks must hold enough liquid assets to meet withdrawals and why a sudden rush of withdrawals can threaten a bank's stability.
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