Current deposit account
Topic: Banking, Credit Creation and Monetary Policy · NCERT: Class 7, Ch 8 "Banks and the Magic of Finance"
Meaning
A current deposit account is a bank account for businesses and traders who make and receive many payments every day. It pays no interest. In return, there is generally no limit on how many deposits and withdrawals you can make. Its balance is a demand deposit, meaning the bank pays it whenever the holder asks. Balances like this count as money in M1.
Example
A shoe trader in Agra pays suppliers by cheque and deposits customer payments several times a day. A current account lets them do all of this without any limit on transactions, but the balance earns nothing.
Don't confuse with
- Savings account: this is for individuals, pays interest and limits how often you can withdraw each month.
- Fixed deposit: the money is locked for a set period at a higher interest rate.
Related concepts
- Deposits
- Savings account
- Fixed deposit
- Demand deposits
- Cheque
- Passbook
- Debit and credit
- Interest
- Compound interest
- Interest rate spread