What is a Demand Deposit?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 29 August 2019
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Demand deposits are funds that are deposited in bank accounts and are available for withdrawal at the discretion of the depositor. The withdrawal of funds from the account does not require contacting or making any type of prior arrangements with the bank or credit union. As long as the account balance is sufficient to cover the amount of the withdrawal, and the withdrawal takes place in accordance with procedures set in place by the financial institution, the funds may be withdrawn on demand.

One of the most common bank accounts that function with a demand deposit approach is the checking account. Many banks allow customers to withdraw money from deposits immediately after the deposit is posted to the account. There may be some exceptions, depending on bank regulations, especially if the demand deposit is made up of checks written on foreign banks, or includes financial instruments that may have to be cleared before the funds are released. Cash deposits, checks drawn on other accounts that are with the same bank, and banks that are well established in the area are normally available credited to the account with no delay and are available for withdrawal the following business day.


There is one type of demand deposit that is often available for withdrawal in a matter of minutes. That is the electronic funds transfer. This type of bank to bank transfer is pre-qualified by the sending bank and is often accepted and posted immediately by the receiving bank. With an electronic transfer of this nature, the recipient can withdraw the entire amount of the demand deposit within minutes of the reception and posting of the transfer.

Withdrawing a demand deposit from a bank account can be accomplished in several ways. One method is to present a check written on the account to the bank. The bank will check the available balance and proceed to cash the check for the customer if there are funds available.

A second and increasingly popular means of withdrawing funds from a demand deposit is with the use of a debit card. However, this approach usually does have some limits, as many banks only allow a certain amount of funds to be withdrawn in a twenty-four hour period using a debit card.

Another option of withdrawing funds from a demand deposit is to transfer funds from one account to another. For example the demand deposit may have been made into the checking account. The customer chooses to transfer all or a portion of the demand deposit into a savings account. This type of transaction can often be accomplished by phone, via Internet access to the accounts, or by visiting the local bank and requesting that the transfer be conducted.


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