A deposit is the act of placing cash (or cash equivalent) with some entity, most commonly with a

financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial insti ...

, such as a

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

. The deposit is a credit for the party (individual or organization) who placed it, and it may be taken back (withdrawn) in accordance with the terms agreed at time of deposit, transferred to some other party, or used for a purchase at a later date. Deposits are usually the main source of funding for banks.

Types

Demand deposit

A demand deposit is a deposit that can be withdrawn or otherwise debited on short notice.

Transaction account A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to th ...

s (known as "checking" or "current" accounts depending on the country) can be used to pay other parties, while

savings accounts A savings account is a bank account at a retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditionally, transac ...

are typically payable only to the depositor or another bank account, and may have limits on the frequency of withdrawal.

Time deposit

Deposits which are kept for any specific time period are called time deposit or often as term deposit. * Term deposit (or ''time deposit''), bear a fixed time and fixed interest rateterm deposit
Investopedia, accessed 2012-05-14. **Fixed deposit in India

', Deposit your trust in Fixed Deposits, siliconindia.com **

Certificate of deposit A certificate of deposit (CD) is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions in the United States. CDs differ from savings accounts in that the CD has a specific, fixed term (often one, t ...

in the U.S. and Canada * Overnight lending occurs usually from noon to noon, using a special rate to give as security or in part payment.

Special deposit

Normally any money deposited to a bank becomes property of the bank, for which it is liable to return the same monetary value, but not the same money. This the foundation of

fractional-reserve banking Fractional-reserve banking is the system of banking operating in almost all countries worldwide, under which banks that take deposits from the public are required to hold a proportion of their deposit liabilities in liquid assets as a reserve, ...

, since the bank can lend out the money that it owns while owing an obligation to the depositor. A ''special deposit'' is one made under an agreement to hold the deposit separately from the bank's assets, so that the same assets can be returned. Items placed in a

safe deposit box A safe deposit box, also known as a safety deposit box, is an individually secured container, usually held within a larger safe or bank vault. Safe deposit boxes are generally located in banks, post offices or other institutions. Safe deposit ...

are examples of special deposits.

References

{{reflist Banking terms

Types

Demand deposit

Time deposit

Special deposit

See also

References