Transaction (Payment or Demand) Deposits
An account used primarily to make payments for purchases
of goods and services
Define:
- Making payment on behalf of customers
- One of the oldest services
- Provider is required to honor any withdrawals immediately
- Hottest item in the transaction deposit field today appears to be the mobile check deposit
- Designed principally for customers on the move, carrying camera-equipped smart phones
Types:
- Noninterest-Bearing Demand Deposits
- Interest was prohibited by Glass-Steagall Act
- One of the most volatile and unpredictable sources of funds
- Most deposits are held by business firms
- Interest-Bearing Demand Deposits
- Negotiable Orders of Withdrawal (NOW) 可转让支付命令账户
- Money Market Deposit Account (MMDA) 货币市场存款账户
- SuperNOW超级可转让支付命令账户
- Mobile Apps: the hottest item in payment
- PayPal, Alipay, WeChat Pay
Nontransaction (Savings or Thrift) Deposits
An account whose primary purpose is to encourage the bank customer to save rather than make payments
Characters:
- Longer-Term
- Higher Interest Rates Than Transaction Deposits
- Generally Less Costly to Process and Manage
Types:
- Passbook Savings Account
- Statement Savings Deposit
- Time Deposit (CD)
- Retirement Savings Deposits
The Composition of Deposits
- Bankers would generally prefer a high proportion of transaction deposits (including regular checking or demand accounts) and low-yielding time and savings deposits
- These accounts are among the least expensive of all sources of funds and often include a substantial percentage of core deposits
The Ownership of Deposits
- the private sector: individuals, partnerships, corporations
- State and local governments
- Central government
- Foreign governments, businesses and individuals
- Other banks
- deposits due to banks and other depository institutions 同业 存款
- deposits due from banks and other depository institutions 存放同业
P299 note
The Cost of Different Deposit Accounts
- Explicit interest rate
- Implicit interest rate: true cost of supplying fund-raising services-the service fees charged
Pricing Deposit-Related Services
Individual depository institution has little control over its prices in a financial marketplace that approaches perfect competition
- It is the marketplace that ultimately sets prices.
- Financial institutions are price takers, not price makers.
