Demand deposit: advantages, disadvantages, design nuances

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Having received a large amount of money after the sale of expensive property (for example, a car or an apartment), the seller will certainly worry about the safety of money. Many experts recommend putting any amount of money into a business to make it work (and it really makes sense). But after all, there are cases when, having sold one car (apartment, cottage), a person plans to buy another soon, then there can be no question of any “work” of money.

On the other hand, it can take quite a long time to find a new purchase, during which money needs to be stored somewhere.

One of the most successful options in such situations is the demand deposit.

You can, of course, rent a safe and keep money there, but in this case you will have to pay for the rent.

In the same case, when cash deposits are opened, then, on the contrary, the bank will pay interest to the depositor.

Of course, if you open a demand deposit, at high interestyou don’t have to count (in many banks the rate on such deposits does not exceed 1%), but the essence of such an action is not to earn money, but not to worry about the safety of funds.

The main advantage of a demand deposit is the ability to withdraw money at any time without additional contracts, agreements and other paperwork. The main thing is that the cashier has the right amount in the right currency (for this, it is advisable to order it in advance). Of course, there are other deposit programs, under the terms of which the client has the right to partially withdraw money from the account without terminating the agreement, but they still require additional efforts from the client, and it is usually not possible to withdraw the entire amount from them.

Besides the free withdrawal of money, the demand deposit is also good because it is opened for an indefinite period (the contract will be valid until the client closes it). Any term deposit can be issued only for a certain period, after which it can be automatically extended, but this cannot last indefinitely - at a certain moment the deposit will cease to be prolonged. In general, the client will need to monitor the status of his deposit, which is not always convenient, and demand deposits do not need this.

As for the shortcomings of the deposit opened under the "on demand" program, the main one is low interest. If we consider all cash deposits in all banks, then demand deposits can be consideredinterest-free, the rate will be so insignificant. However, in situations of complete financial uncertainty, a demand deposit is just what you need. If after some time it turns out that the money is not needed in the near future, then it can be re-registered for a term deposit in order to earn more interest.

It turns out that the type of deposit "on demand" is a great opportunity to temporarily leave your money in the bank for safekeeping, without paying any rent and without losing commissions when replenishing or withdrawing. But you should not keep money on such a deposit all the time - there are more profitable options.