DDA — Demand Deposit Accounts

Demand Deposit | Features, Importance of Demand Deposits

DDA - Demand Deposit Accounts

Demand Deposit is a bank account that allows the depositor to withdraw funds on demand without any advance notice to the bank. An easy example is the Checking account. It provide the funds user needed to purchase household expenses or daily expenses.

The depositor can withdraw amount any time from a depository institution and there is no limit on a number of transactions a depositor can do in these accounts ( a fee may be charged by a depository institution for such transactions).

This accounts allows joint owners of a single DDA, where each owner has to sign in order to open the account. While if the account needs to be closed, only one of the owners is required.

It does not pay any interest to the depositor or sometimes a notional amount of interests due to its lower lock-in term as compared to time deposit which is generated for a specific lock-in period. It pays higher and fixed interest rate. 

How does Demand Deposit Work?

DDA accounts provide an amount for daily purchases. The amount can be accessed anytime from banks.

In case, if depositors needs to inform Depository institutions before withdrawing funds the depositors would have been facing difficulties while paying bills or purchasing daily necessities.

DDA also mean Direct Debit Authorization, according to which you can debit from an account on paying for any goods and services. 

These are also considered as part of M1 currency by the Federal Reserve, which is the most liquid type of money while measuring money supply. The money supply of a country is usually defined as the combination of currency and demand deposits.

In most countries, it is considered for the majority of the money supply.

During the Financial crisis, people start withdrawing cash from banks and other financial institutions, leading to a reduction in demand deposits and shortening of the money supply. 

1. Checking Accounts

Checking Accounts are the accounts that provide easy access to cash. In these accounts, users can withdraw cash from ATM, Debit Cards, by writing checks anytime. However, Checking Accounts do not pay interest to the depositors. 

2. Savings/Term Deposit Accounts

Saving/ Term Deposits are the accounts that are created for a longer duration as compared to Checking accounts. These accounts offer a higher interest rate as compared to no interest rate in Checking accounts.

A depositor can withdraw funds in Saving Accounts from bank Teller or using Online Net Banking. These accounts do not provide a facility for writing checks for withdrawal.

A Bank may charge on early withdrawal but there is no fees for maintaining these accounts. 

3. Money Market Accounts

Money Market Accounts are the accounts that pay interest to consumers the Market Interest rate. Due to which, the interest rate fluctuates too much in these accounts and is quite unpredictable. As a result, interest rate might sometimes less than Savings account or more. However, banks does not charge any fees for maintain these accounts. 

Example of Demand Deposits

Suppose, Alessandro has a 150,000$ balance in his saving account as on Nov’19 2017. On Dec’01 2017, he made a debit of 50,000$ which lefts 100,000$ in a bank on Dec’01 2017. Now, on Dec’21 2017, he deposits 25,000$ in saving account again. Assume that interest paid by the bank is 2% per annum on daily basis for a savings account. 

He will get interest as follows: 

  • will receive interest from Nov’19 to Dec’01 on his 150,000$ amount with a 2% rate pa. 
  • will receive interest from Dec’01 to Dec’21 on his 50,000$ amount with a 2% rate pa. 
  • will receive interest from Dec’21 to DEec’31 on his 75,000$ amount with a 2% rate pa. 

Features of Demand Deposits

Some of the features are given below:

  • Funds can be withdrawn from the financial institution on demand. 
  • Interest can be paid to owners of demand deposit account funds available in the account. 
  • There is no eligibility criteria for a user to create a demand deposit account. 
  • There is no limit on a number of withdrawal and transfers for a consumer. 
  • There is no maturity period applied in the demand deposit account. 

Importance of Demand Deposits

Some of the importance is given below:

  • Ease of Access to withdraw funds. 
  • Multiple sources to withdraw funds: ATM, Online Baking, Bank Teller, checks. 
  • These are also considered in Money Supply by Federal Reserve. In most countries, it is considered for the majority of the money supply. 

Term Deposits vs Demand Deposits

Term deposits also referred to as time deposits, are the accounts generated for a fixed period of time The maturity period may range from one month to a few years.

The depositor receives a predefined interest rate on the term deposit over the specified term. Term deposit accounts usually pay a higher interest rate than Demand Deposits.

 The amount deposited in Term Deposits gets locked for a specified time period. 

How Term Deposit different from Demand Deposits: 

  • Carry Higher interest rate than Demand Deposits 
  • Liquidity is low as compared to Demand Deposits. 
  • Funds get locked-in in Term Deposits.


Some of the advantages are given below:

  • Demand Deposits allows the depositor to withdraw funds on demand without any advance notice to the bank. 
  • Demand Deposit allows joint owners of a single account. 
  • The consumer can easily access their money from Demand Deposits. Some ways are Bank Teller, Net Banking, ATMs, by writing checks. 
  • User can withdraw funds any time whenever required for personal use or domestic needs and ample number of transactions are allowed. 
  • Electronic Transfer is allowed in Demand Deposits. You do not need to carry cash when you have Demand Deposit account. 
  • Banks do not charge any extra fees for withdrawing the amount. 
  • These are also considered in Money Supply by Federal Reserve. 


Some of the disadvantages are given below:

  • Demand Deposits pays very low interest or sometimes no interest at all. But, Banks usually charge monthly fees in order to provide services for these accounts. 
  • If we compare Return on Investment in Deposit accounts with Treasury bills, commercial papers, the return is quite low as compared to these investments. Similarly, there are many investments with less risk offers a higher rate of interest than Demand Deposits. Capital Appreciation in Demand Deposits is very low when compared to market inflation rates. 


  • Demand deposits accounts offer higher liquidity on comparing with any other deposit products offer. These accounts are an easily available source of cash for individuals and business. Even though the rate of return on investment is quite lower, it offers a risk-free return. 
  • Also, fee applied by financial institutions to maintain these deposits is much lower when compared to other investment sources available in the market.  
  • Also, the money supply of a country is usually defined as the combination of currency and demand deposits. In most countries, Demand deposit is considered for the majority of the money supply. 
  • Hence, if the main objective of an individual is to access the fund easily and not the interest earned on the amount, than Demand Deposit is the best option. 

This is a guide to Demand Deposit. Here we also discuss the introduction and how does demand deposit work? along with features and importance. You may also have a look at the following articles to learn more –

Источник: https://www.educba.com/demand-deposit/

What is a DDA debit?

DDA - Demand Deposit Accounts

What is a DDA debit?

DDA stands for Direct Debit Authority. This is an instruction given by a customer to a bank from which he/she has borrowed to recover the periodic payments from another bank where the customer maintains an account.

DDA has got a validity period, frequency, recovery date, and amount amongst many attributes. On the recovery date, the beneficiary bank sends the DDA recovery instruction to the source bank through the Central Bank.

In banking, the acronym DDA stands for ‘Demand Deposit Account’ which is just another term for ‘Checking Account’. DDA Debit is a debit transaction from that account which could be a withdrawal, transfer, payment, or purchase.

The Source bank replies to the Central bank with a positive/negative response. This response is then forwarded to the beneficiary bank.

For more information on the specifics of that DDA Debit, you can chat with us or give us a call. To chat with a live agent, please visit our Customer Service page, scroll down, and then select ‘Chat with Us’ to be connected to a live agent who would be happy to assist you.What is a DDA debit?

Please keep in mind this option will only appear if there are currently agents available to assist you via the chat channel. You can also reach out to our 24/7 Customer Service team at 1-800-922-9999.

What does a DDA deposit mean?

DDA is a demand deposit account. A DDA deposit means a deposit was made to your DDA. Deposited funds can be withdrawal at any time.

DDA stands for Demand Deposit Account. In other words, your Checking Account at your Bank. So a DDA Deposit is a Money deposited in your Checking Account.

Money deposited in that type of account can be withdrawn on demand through a Check or Debit Card POS transaction.

What is a DDA bank account?

DDA stands for a demand deposit account which is basically a checking account.

A debit to that could technically be done in a few ways:

  1. via the Automated Clearing House (ACH) network
  2. via a debit card over the debit card network (e.g. Visa/Mastercard/Amex etc.


  3. A smallish number of DDA accounts are connected to other networks the Dwolla network, and you can do a debit via that.
  4. Via an account-to-account transfer inside of the bank

The most ly meaning of this phrase is for an ACH debit. Those letters were used regularly in the banking industry prior to 2000 as the abbreviation of “Demand Deposit Account”.

A term used to refer to checking accounts or money market savings accounts (which, for some banks, can be accessed by debit cards, checks, and/or other electronic methods).

This is an example of a term that is designed to describe what the product does.

In this case, money can be withdrawn from these accounts with a written request (demand) and the addition of funds is considered a deposit (rather than a “payment”).

Using the words “bank account” after “DDA” is unnecessary and redundant (demand deposit account bank account) but, similar to “PIN Number” and “ATM machine”, its a commonly used phrase and few recognize the awkwardness.

Note: It’s possible if you saw that phrase used in some form of advertisement, that “DDA” is some bank’s proprietary product name or the abbreviation of it, but I doubt it.

What is a DDA debit? How are such debit transactions performed?

Most basic retail banking consumer accounts are classified as DDA accounts. This allows you to demand your money from the bank at any time.

The important thing to consider is that these accounts only provide consumers limited financial protection in the form of FDIC insurance. Credit unions have similar, although, differently labeled insurance for their accounts.

Finally, even some hybrid investment/ checking/ C. D./ Savings accounts have insurance options. It is important that your accounts are properly titled to ensure maximum coverage in case of a major financial crisis similar to The Great Recession of 2008.

DDA essentially means “checking account.” SAV is a saving. A DDA can be anything from a standard checking to a money market or an HSA (Health Savings Account). Essentially any account a check could be written off of.

DDA = Demand Deposit Account = Checking AccountWhat is a DDA debit

What does the DDA deposit stand for in my online banking?

It stands for Demand Deposit Account. That means it’s a checking account and you can “demand” the money in it at any time. (Excepting any funds you may have deposited that have not had time to clear)

A savings account or a Certificate of Deposit is NOT a demand account because there may be restrictions on withdrawing the money, depending on the bank’s regulations.

DDA stands for Demand Deposit Account which allows the holder of the account to withdraw funds without advanced notice.

Some of these accounts are also NOW accounts which are checking accounts that accrue interest. I believe the criteria for this is that a certain balance is maintained at all times.

I am not too sure of this now, but the last time I had an interest-bearing checking account, that was the case. DDA usually means “Direct Debit Authorization”. and is basically a type of transaction that debits (deducts from) your account balance when you make a purchase.

Basically the opposite of a credit card, which adds to your outstanding balance when you make a purchase.

DDA Withdrawal Options

Before the days of digital banking, and even before the days of debit-card transactions, your DDA withdrawal options were limited. But today you have numerous options for accessing the funds in your DDA, including:

  • Check writing.

     Still used by many DDA users, writing checks to withdraw cash, pay for purchases, and make bill payments remains an “old-fashioned” way to access the funds in your DDA.

  • Teller transaction. Way back in the day, walking into a bank and up to a teller window was the way to make a withdrawal from a DDA.

    If you the face-to-face contact with your banker, tellers will still give you cash from your DDA – at the bank counter or at the bank’s drive-through.

  • Automatic Teller Machine transaction. The advent of ATMs opened a whole new world for DDA customers.

    Gone were the days when you had to make sure you made it to the bank to cash a check because most ATMs offer round-the-clock access. Banks issue debit cards for accessing your account at an ATM, from which you can even check your DDA balance. You can generally use your debit card at another bank’s ATM, although you’ll ly have to pay that bank’s ATM transaction fee.

  • Online banking. If you set up an online banking account, you don’t even have to leave the comfort of your home to make immediate (or scheduled) bill payments from your DDA.

    Simply by entering your username and password, you can access your account online and pay a bill or make a purchase using your debit card information or your checking account information. Online banking makes it possible to transfer funds from your DDA to another account or check your DDA balance online.

  • Mobile app. With your smartphone or tablet, you can use your DDA to pay bills, make purchases, or check your account balance.

Demand Deposit Vs. Term Deposit

Negotiable order of withdrawal account is another type of checking account, but it’s not a DDA. A NOW account is an example of a term deposit account (also known as a time deposit account) instead of a demand deposit account.

The difference is that a NOW account may limit your withdrawals and money transfers, and you have to wait for a predetermined time period before you can access your funds without penalty. A money market account is another example of a checking account that’s not a DDA.

Some DDAs carry fees, including service charges. Your financial institution may require a minimum balance in your DDA, and you’ll owe a monthly fee if your balance dips below this minimum. If you overdraw the funds in your account, you’ll ly have to pay an overdraft fee. Some banks have a monthly maintenance fee for their DDA account holders.

Reviewing your bank’s fee schedule will let you know exactly what fees you’ll owe for your DDA. And be sure to look for the ways your bank may reimburse or override certain fees. You may not have to pay the monthly maintenance fee, for example, if you authorize direct deposits of your paychecks.

Conclusion: DDA Debit

DDA stands for a demand deposit account, which is just a way to describe any account that you can deposit to and withdraw from ‘on-demand’. So DDA deposit is just a transaction description.

How did you get that:

A deposit that included a check-in was made to your account. Assuming it wasn’t you who made the deposit, otherwise, you’d already know how you got it.

Were you expecting a payment from someone?

Maybe a family member, friend, or employer made a deposit to your account. Admittedly, this question also asks “how did I get that”. All the information so far seems to be that “DDA” indicates “demand deposit account” (which, IMO, would refer to a checking account but not a savings account).

But it’s already showing up on your checking account transactions, so it seems redundant to indicate “DDA”. If it just means it’s a deposit to the account, why doesn’t it just state “Deposit” instead of “DDA deposit”? Isn’t that kind of redundant?

What does DDA mean on a bank statement?

DDAs, or demand deposit accounts, are offered by banks and credit unions. These accounts are primarily used for frequent transactions, such as checking accounts.

However, the term “DDA account” refers to any bank account that you can deposit to and withdraw from immediately, on-demand.

What is a DDA transaction?

A DDA is, for all intents and purposes, a checking account. It is a financial transaction vehicle where the money deposited into the account is made immediately available for transactions.

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Источник: https://makeeasylife.com/dda-debit/

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