A demand deposit is a type of deposit account held at a bank or financial institution that allows customers to withdraw their funds on demand without any notice or penalty. In other words, the account holder can access their funds at any time, and there is no fixed maturity or term associated with the deposit.
Typically, demand deposits are used for everyday transactions such as paying bills, making purchases, or withdrawing cash from an ATM. Examples of demand deposit accounts include checking accounts, savings accounts with check-writing privileges, and money market accounts.
Demand deposits are considered to be highly liquid, as they can be easily converted to cash or used for payments, making them a popular choice for individuals and businesses. However, demand deposit accounts usually offer lower interest rates than other types of deposit accounts, such as time deposits or certificates of deposit, which require customers to leave their funds deposited for a fixed period of time.