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Financial Dictionary - Demand deposit

Demand deposit

A demand deposit, also known as a current account or bank account, is a financial instrument that banks offers to their customers, enabling them to manage their money: paying in, withdrawing and transferring money at any time without having to notify the bank, etc.

Bank accounts are deposits of money that are used as an operational resource to carry out all sorts of banking transactions, such as paying in your salary, paying bills, making direct debits from other banks, paying off loans, or arranging mortgages, credit facilities and pension plans, among other financial services. 

They are therefore a very convenient and easy way for us to meet our day-to-day expenses, as we can withdraw our money at any time. Meanwhile, new technologies have opened the door to online transactions, enabling us to manage our deposits in any place and at any time, from our mobile or computer.

Demand deposits are one of the main sources of funding for banks, especially current accounts. The reason is that they are transaction-based accounts (unlike savings accounts). Account activity takes place both inside and outside the bank, in the sense that the money withdrawn by one customer is offset by the money paid in by another customer, as transactions from third-party banks and customers reach the bank.

Main characteristics of bank accounts or deposits

Main features of these products:

  • Easy and quick to arrange. 
  • A useful option for saving money in the short or long term.
  • Allow for centralised payment of financial obligations from one place.
  • May offer extra benefits or liquidity, although this will always depend on the bank with which the account is associated, as well as the specific characteristics or terms of the deposit.
  • Often come with free credit and debit cards, or exclusive fees and other rewards for customers.
  • Offer highly competitive benefits if the customer has their salary paid directly into the account. In this case, the product is called a salary account. Having our salary paid directly into our account can make our life easier, and if we set up direct debits for all our regular expenses (electricity, water, telephone, etc.), we no longer run the risk of forgetting to pay our bills each month.
  • There can be one or more account holders, making it an ideal option if you live as a couple or share a flat, as it allows you to have just one account for your mortgage repayments and other day-to-day expenses: electricity, water, gas, communal homeowner fees, etc.


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