What Is a Demand Deposit Account?

What Is a Demand Deposit?

By Robin Hartill, CFP – Updated Aug 7, 2025 at 8:36 PM

Key Points

Demand deposit accounts allow immediate money access and are FDIC or NCUA insured up to $250,000.
Interest rates on demand deposits are low, reflecting their high liquidity and immediate access features.
These accounts suit daily expenses, emergency funds, or short-term savings, offering various withdrawal methods.

A demand deposit is money you deposit into a bank account that you can withdraw at any time. In this article, we’ll define demand deposits, explain how they work, and give some common examples of demand deposit accounts.

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Person using key at safety deposit box. — Image source: Getty Images

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FDIC

The Federal Deposit Insurance Corp. (FDIC) is the federal agency that oversees and supervises member financial institutions like banks and thrifts. It is also the insurer for bank deposits.

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Bonds

Bonds are debt securities that entitle the holder to receive interest payments.

A demand deposit account is a good choice for the following:

Money you need for daily expenses: A checking account is the best way to pay for daily expenses and monthly bills because you have many ways of accessing your funds, including a debit card, checks, ATMs, and in-person withdrawals.
Emergency savings: It’s wise to store three to six months’ worth of expenses in an emergency fund that you can withdraw at any time without penalty.
Short-term savings: If you’re saving money for a short-term goal, like a down payment or vacation, a demand deposit account is often a good choice. You typically don’t want to risk money you’ll need within the next couple of years to stock market volatility. And although you could earn more interest on a safe investment, like Series I savings bonds or CDs, you won’t be able to access your money at any time.

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About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

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Bank of America is an advertising partner of Motley Fool Money. Robin Hartill has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.