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What Are Demand Deposits

4 min read

What are demand deposits

Written By

Brandi Marcene

Have you ever wondered what happens to the money you deposit into your bank account? Well, let's talk about demand deposits – a term you've probably heard but might not fully understand. Demand deposits are essentially funds held in a bank account that you can access at any time, on demand.

Think of your everyday checking account: when you deposit money into it, you can withdraw it whenever you need it, whether it's to pay bills, make purchases, or simply grab cash from the ATM. This flexibility to access your funds whenever you want is what makes demand deposits so convenient.

For example, imagine you deposit $500 into your checking account. With demand deposits, you can go to the bank the next day and withdraw $100 to buy groceries or leave the money untouched for a week before using it to pay your rent. The key is that the money is available to you whenever you need it, without any restrictions or delays.

Understanding demand deposits is fundamental to managing your day-to-day finances effectively and making the most out of your banking experience.

So, let's dive deeper into what demand deposits entail and why they're essential in the world of banking and personal finance.

What are Demand Deposits?

A demand deposit account DDA is a fundamental offering of any financial institution. These accounts provide depositors with immediate access to their funds "on demand," distinguishing them for their high liquidity. Unlike term deposit accounts, demand deposit accounts pay interest and allow depositors to withdraw money without penalties or restrictions.

Whether it's transferring funds between checking and savings accounts or splitting money between different banks, demand deposit accounts offer the flexibility and convenience needed for everyday banking transactions.

The key characteristic of demand deposit accounts is their flexibility and accessibility. When opening a bank account in Canada, individuals often opt for demand deposit accounts like checking or savings accounts due to their ease of use and convenience. With DDAs, depositors can transfer money between bank accounts seamlessly, whether it's transferring funds from a checking account to a savings account or splitting money between banks.

Term deposit accounts, such as certificates of deposit (CDs), require depositors to commit their funds for a specified period, during which withdrawals may be subject to penalties or restrictions. In contrast, DDAs allow for unlimited withdrawals without penalties or restrictions, making them ideal for everyday banking needs and transactions.

When transferring money between bank accounts, depositors can easily move funds between demand deposit accounts without worrying about withdrawal limitations or penalties.

Types of Demand Deposit Accounts

Checking Accounts

Checking accounts are one of the most common types of demand deposit accounts designed for everyday transactions and banking needs. With a checking account, depositors can deposit money, withdraw funds, and make purchases using checks or debit cards.

Can I cash a cheque online? Yes, many banks offer mobile banking apps or online platforms that allow depositors to deposit checks remotely by taking a photo of the check with their smartphone. This convenient feature eliminates the need to visit a physical bank branch to cash a check.

Are chequing and savings accounts insured? In Canada, deposits held in both checking and savings accounts are typically insured by the Canada Deposit Insurance Corporation (CDIC). CDIC insures eligible deposits up to $100,000 per depositor, per insured category, in the event of a bank failure.

Savings Accounts

Savings accounts are another type of demand deposit account, primarily used for storing money and earning interest over time. These accounts are ideal for individuals looking to set aside funds for future goals or emergencies.

While savings accounts are primarily designed for saving money rather than spending, some banks may offer the option of making purchases with a savings account debit card or by transferring funds to a checking account for spending purposes. However, withdrawals from savings accounts may be limited to a certain number per month due to federal regulations.

Money Market Accounts

Money market accounts are a type of demand deposit account that combines features of both checking and savings accounts. These accounts typically offer higher interest rates than traditional savings accounts while providing the flexibility of a checking account.

When considering the safety of their funds, depositors may wonder, “Are Canadian bank accounts insured?” Fortunately, the answer is yes. The Canada Deposit Insurance Corporation (CDIC) provides insurance coverage for eligible deposits held in Canadian banks, including money market accounts. With CDIC insurance, depositors can have peace of mind knowing that their funds, up to $100,000 per depositor, per insured category, are protected in the event of a bank failure.

Benefits of Demand Deposits

Demand deposits offer a range of benefits that make them an essential part of everyday banking. Let's explore some of these benefits in detail:

Accessibility and Liquidity

Demand deposits provide immediate access to funds, allowing depositors to withdraw money whenever needed without any waiting period or restrictions. This high level of liquidity ensures that funds are readily available for daily expenses, emergencies, or other financial needs.


Demand deposit accounts offer multiple channels for accessing and managing funds, providing depositors with flexibility and convenience. Whether it's writing checks, using debit cards for purchases, or conducting transactions online through banking apps or websites, depositors have various options to manage their money efficiently.


One of the most significant advantages of demand deposit accounts is the assurance of security provided by government agencies such as the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). These agencies insure deposits held in demand deposit accounts up to certain limits, protecting depositors' funds in the event of a bank or credit union failure.

Payment Options

Demand deposit accounts facilitate a wide range of payment options, making it easy for depositors to handle electronic payments, bill payments, and other financial transactions.

Whether it's setting up automatic bill payments, transferring funds to other accounts, or receiving direct deposits, demand deposit accounts streamline the payment process and offer convenience in managing finances.

Choosing the Right Demand Deposit Account

Choosing the right demand deposit account is important for managing your money wisely. Here's how to do it:

  1. Think About Your Needs: Consider how you plan to use the account. Do you need easy access to your money for everyday expenses, or are you looking to save and earn interest? Your spending habits and financial goals will help you decide.

  2. Compare Accounts: Look at the features and fees of different accounts offered by banks or credit unions. Check for things like monthly fees, ATM access, and online banking options. Choose an account that fits your needs and doesn't charge you for things you don't need.

  3. Check Interest Rates and Requirements: See what interest rates the accounts offer and if there are any minimum balance requirements. Make sure the account's transaction limits match how often you plan to use it.

  4. Explore Online and Mobile Banking: Make sure the account offers online banking and a mobile app if you like to manage your money on the go. Features like mobile check deposits and account alerts can make banking easier.

If you think of when to open your first bank account, keep an eye out for any special offers, like a free credit score, when you sign up. And don't forget to look into options like the Canada PRO deposit, which might give you extra benefits like higher interest rates.

By taking your time and considering these factors, you can choose the perfect demand deposit account for your needs and start managing your money with confidence.

Wrapping Up

Demand deposits are like your financial safety net, always there to catch you when you need them. Whether it's your checking account for everyday expenses, your savings account for future goals, or your money market account for a little extra growth, demand deposit accounts offer the flexibility and accessibility you need to manage your money with ease.

Understanding demand deposits is like having a key to unlock the door to financial freedom. From immediate access to funds to the security provided by government insurance programs, demand deposits offer convenience, peace of mind, and the opportunity to take control of your financial future.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!


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