A transaction involving a transfer of funds to another party. A financial deposit is an amount of money deposited in a banking institution. A deposit account can come in the form of a savings account, checking account or other types of bank accounts; it allows the account holder to deposit money and withdraw it under certain conditions established in the contract.

This term comes from the Latin “depositus” and it means “to lay aside, put down” and it refers to the action of depositing, handing in, locking in or protecting valuable goods and the institution that does has to respond to them when they are asked for.

There are several types of deposit accounts:

  1. Checking account: it is a transactional deposit account held at a financial institution that offers various flexible payment methods to allow customers to distribute money directly to others. This type of account differs from other bank accounts in that it often allows for numerous withdrawals and unlimited deposits, it usually comes with a check book and it allows arranging direct debits and payments via a debit card. The money held in a checking account is very liquid, in exchange for which it does not typically offer a high interest rate, and some may not pay interest at all. banks may require a minimum deposit into the account to open or maintain the account.
  2. Savings account: it is a deposit account held at a bank or another financial institution and it allows the account holder to save money and earn interest on the money held in the account. It differs from the previous account in several ways: the account holder may not be able to write checks from the account and it is likely to have a limited number of transfers or withdrawals. savings accounts are not meant to be used as a medium of exchange; customers can set aside a portion of their liquid assets and earn a low monetary return (although higher than in a checking account), which is the reason why the institution where the account is held may ask for previous notice before withdrawing money from the account, or impose a penalty for withdrawal before a specified date. savings accounts are insured by the Federal deposit Insurance Corporation (FDIC) or the National credit Union share Insurance Fund.
  3. Money market account (MMA): it is a savings account that offers a higher interest rate than other savings accounts, based on current interest rates in the money markets, in exchange for larger than normal deposits. It offers many of the same services as a checking account such as the option to write checks, although transactions are limited to a monthly basis. This type of account is ensured by the Federal government.
  4. Certificate of deposit (CD) (in US)/Time deposit: A money deposit at a banking institution intended to be held until the end of the pre-fixed period of time so it can only be withdrawn beforehand by giving previous notice and it may include a penalty.

These deposits are set for a fixed period of time, from 30 days up to 5 years (the longer the term, the higher the interest earnings – usually), and at its end the account holder can renew it for another term. Fixed rates are more common than variable rates, although they also exist. CDs are similar to savings accounts in that they are insured by the Federal deposit Insurance Corporation (FDIC) for banks and National credit Union Administration (NCUA) for credit unions. They are different from savings accounts in that the CD has a specific fixed term, as mentioned earlier. The account holder may receive a paper certificate in the moment of the account’s opening, but it is now common for a certificate of deposit to consist only on a book entry and an item shown in the consumer’s periodic bank statements.