What are Bank Deposits?

Deposits are cash, checks, and electronic transfers that banking customers put into their personal or corporate bank accounts.

Deposits will increase the balance, or pay off a debt, within a bank account. Deposits may not show up on an account balance until they have cleared from the institution or account from which the check is written or the electronic transfer was requested.

The types of accounts that can receive bank deposits include but are not limited to checking, savings, and money market accounts. Bank Certificates of Deposit (CDs) can be purchased with an initial deposit that satisfied minimum amount. Deposits are considered liabilities on the balance sheet of the bank, since they are obligated to pay that money out when a customer requests it.

In the United States, a bank must have Tier 1 reserves (basically called paid-in capital in other businesses) of 10% of a deposit to even accept the deposit. Once they have satisfied their Tier 1 reserves, they can lend out up to 100% of money deposited into long-term accounts like CDs and savings accounts, and up to 90% of the amount deposited into transactional accounts like checking and money market accounts.

People usually make deposits for the convenience offered by electronic checking and banking options such as automatic bill payment, and some banks add interest to checking and savings accounts to attract customers.

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