What Is a Transaction Deposit?

The term transaction deposit refers to a deposit made to a transaction account, such as a checking account. Transaction deposits are liquid, which means the account holder can access the funds right away without any delays, waiting periods, or penalties. As such, a transaction deposit can be used for other transactions at the request of the account holder. Banks may put restrictions on how and when certain deposits can be used, such as large deposits that are put on hold. Transaction deposits work differently than non-transaction deposits, which are made into accounts that mature after a period of time.


  • A transaction deposit is a deposit made to a transaction account, such as a checking account.
  • Transaction deposits and accounts are liquid, which means the money deposited is available instantly upon request.
  • Transaction deposits can be made in person at a bank, through an ATM, or via electronic transfer.
  • Some banks may impose restrictions or waiting periods on certain deposits made to transaction accounts, such as a large check that requires verification.
  • Deposits to non-transaction accounts are not fully liquid, which means withdrawals may require some notice or a waiting period.


How Transaction Deposits Work

As noted above, transaction deposits are any deposits that are made to transaction accounts. Also called demand deposits, they are liquid, which makes them easily accessible by the account holder. This means that if a consumer needs access to their money, they don’t need to provide the bank or account provider with any advanced notice.

Deposits can be made in bank branches, at automated teller machines (ATMs), and by transferring funds from another account. Direct deposits also qualify as transaction deposits. Individuals who wish to access their transaction deposits can do so in one of several ways, including:

  • In-branch withdrawals
  • ATM withdrawals
  • Transfers to another account
  • Check-writing
  • Bill payments
  • Wire payments
  • Automated clearing house (ACH) transfers

Given how liquid they are, transaction deposits allow individuals to meet their day-to-day banking needs whenever they wish. There are generally no limitations on these deposits unless otherwise indicated in the account agreement or its terms and conditions.


Special Considerations

In order to be considered a transaction account, an account must allow unrestricted transfers and withdrawals, deposits must not have a maturity date, and allow debit transactions on demand within a seven-day period. There must also be no eligibility requirements for this type of account.1

Some banks may place certain restrictions on transaction deposits and accounts. A bank may put a partial or full hold on large or unusual deposits for a certain period of time. This may be the case for a customer who deposits a large check to their account that needs to be verified before the funds are released. They may also do this for new accounts that don’t have an established history. Once the hold period is up, though, the funds are fully accessible.

Savings accounts that allow account holders with unlimited access are also considered transaction accounts.


Transaction Deposits vs. Non-Transaction Deposits

Transaction deposits are the opposite of non-transaction deposits. These are deposits that are made to non-transaction accounts, such as savings accounts, money market accounts (MMAs), and certificates of deposit (CDs). These accounts generate interest, giving the account holder a return on their investment.

The difference between these two types of deposits is the ease and speed at which funds can be accessed from the account. Unlike transaction deposits, non-transaction deposits are not nearly as liquid because account holders are either limited or restricted from accessing all or part of the funds in the account. Or they must make a request for a withdrawal.

For instance, CDs require investors to lock up their money for a specified period of time, from several months to several years. Early withdrawals may be permitted, but the account holder may forfeit any interest and may have a fee deducted from their principal balance. Similarly, some banks may limit the number of debit transactions from savings or MMAs every month. If they go over that limit, the bank may charge them a withdrawal fee.

The Federal Reserve’s Regulation D restricted withdrawals from MMAs and savings accounts to six per month. Individuals who went over this limit were charged a service fee while banks were able to revoke and convert these vehicles to regular accounts for people who consistently went over the six withdrawal limit. This was put in place to help financial institutions meet their reserve requirements. The Fed lifted these restrictions in April 2020, giving banks the authority to decide how to manage customer withdrawals from these accounts.2

Non-transaction deposits may also be referred to as time deposits or term deposits.


Example of Transaction Deposits

Funds in a checking account are examples of transaction deposits because they can be used for daily expenses or may be withdrawn from an account by the holder of the account. In contrast, time-based deposits, such as a CD, are examples of non-transaction deposits because they cannot be transferred or withdrawn at a moment’s notice.


What Conditions Must an Account Meet to Be Considered a Transaction Account?

According to the Federal Reserve, transaction or demand deposit accounts must allow for unrestricted withdrawals and transfers on demand within a seven-day period, they must not have a maturity period, and there must be no eligibility requirements.1


What Is the Difference Between a Transaction and Non-Transaction Deposit?

Transaction deposits are made to transaction accounts, such as checking accounts. Individuals have easy access to these funds on demand without restriction. Non-transaction accounts, on the other hand, may come with limitations on how and when the funds can be withdrawn. For instance, a bank may restrict holders of a savings account to a certain number of withdrawals per month.


What Is a Time Deposit?

A time deposit is a deposit made to a non-transaction account. This type of account is normally interest-bearing and generally has a maturity date. Withdrawals may be restricted when it comes to these kinds of accounts. Some savings accounts may qualify as non-transaction accounts, as do CDs.

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