A deposit is the act of placing cash (or cash equivalent) with some entity, most commonly with a
financial institution
A financial institution, sometimes called a banking institution, is a business entity that provides service as an intermediary for different types of financial monetary transactions. Broadly speaking, there are three major types of financial ins ...
, such as a
bank
A bank is a financial institution that accepts Deposit account, 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 m ...
.
The deposit is a credit for the party (individual or organization) who placed it, and it may be taken back (withdrawn) in accordance with the terms agreed at time of deposit, transferred to some other party, or used for a purchase at a later date.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A demand deposit is a deposit that can be withdrawn or otherwise debited on short notice.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, cheque account, chequing account, current account, demand deposit account, or share account at credit unions) is a deposit account or bank account held at a bank or other financial instituti ...
s (known as "checking" or "current" accounts depending on the country) can be used to pay other parties, while
savings accounts 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.
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Term deposit (or ''time deposit''), bear a fixed time and fixed interest rate
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Investopedia, accessed 2012-05-14.
**Fixed deposit in India
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Certificate of deposit
A certificate of deposit (CD) is a time deposit sold by banks, thrift institutions, and credit unions in the United States. CDs typically differ from savings accounts because the CD has a specific, fixed term before money can be withdrawn wit ...
in the U.S. and Canada
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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 in all countries worldwide, under which banks that take deposits from the public keep only part of their deposit liabilities in liquid assets as a reserve, typically lending the remainder to ...
, 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 are examples of special deposits.
See also
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Deposit slip
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Passbook
A passbook or bankbook is a paper book used to record bank or building society transactions on a deposit account.
Traditionally, a passbook was used for accounts with a low transaction volume, such as savings accounts. A bank teller or postm ...
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Deposit account
A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained bel ...
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Security deposit
A security deposit is a sum of money held in trust.
In leasing, security deposits, also known as "rent deposits", are required most often by lessors of automobiles, residential property, and commercial real estate.
Security deposits in the Un ...
References
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Banking terms