Difference between Demand Deposit and Term Deposit


Demand deposits comprise assets or funds that the account holder can get to access immediately; they are accessible whenever. The assets and funds in a regular savings account or in a checking account typically comprise demand deposits.

Interestingly, time deposits, also known as term deposits, are not quickly at the record or account holder’s reach. They are reserves or funds that have been saved with the arrangement that they will stay immaculate or remain untouched for a specifically indicated time frame of months or even years. Certificates of deposits (CDs) are a typical kind of time deposit.

Meaning of Demand Deposit:

Demand deposits accounts offer more prominent liquidity and simple entry or ease of access when contrasted with term deposits yet pay lower interest rates, and they may likewise incorporate different expenses for taking care of the record or the account. Contributors or depositors can pull out or withdraw any or every single of the assets or funds in a demand deposit account whenever without a fine or penalty or earlier notification required. Though a few banks charge a little expense on the off chance that you surpass their constraint of the month-to-month withdrawals.

Reserves or funds a contributor or the depositor might have to access whenever should be kept in a demand deposit account. Instances of demand deposit accounts incorporate savings accounts, money market accounts, or regular checking accounts.

Demand deposits and term deposits vary as far as liquidity or terms of accessibility, and in how much interest can be procured on the kept or deposited funds.

Meaning of Term Deposit:

Term deposits, otherwise called time deposits, are investment deposits made for a foreordained period, going from a couple of months to quite a long while. The investor or the deposit gets a foreordained rate of interest on the term deposits over the predetermined period. Reserves or funds deposited for longer periods order a higher interest cost. Term deposit accounts pay a higher rate of revenue or rate of return than customary savings bank accounts.

Reserves or funds can’t be removed from a term deposit account until the termination of the picked period without causing a monetary fine, and withdrawals that regularly require composed notification ahead of time. Toward the termination of the time period, the contributor or the depositor has the decision of pulling out or withdrawing deposits of assets in addition to procured interest or turning over the assets into another term deposit. The most widely recognised type of term deposit is a bank certificate of deposit, also known as a CD.

Difference between Demand Deposit and Term Deposit:




A demand deposit can be accessed at any time and withdraw any amount of funds without prior notice given to the bank.

A term deposit can’t be accessed at all until the lock period is served. No withdrawals can be made in term deposits until the date of maturity has arrived.

Time Period

A demand deposit has no fixed time period for its kind.

There is a fixed time period under term deposits.

Rate of Interest

The rate of interest lies between 4 per cent to 6 per cent in the case of current account and savings bank accounts.

The rate of interest that can be earned under term deposits lies between 7 per cent to 9 per cent.


Whenever the account holder needs to access demand deposits, all he needs is access to ATMs or online banking, where the depositor can withdraw from his respective account.

Since the funds are locked until maturity the depositor can’t access or withdraw from his account and hence having access to ATMs and online banking or credit cards are not needed.


Presented by credit unions and by banks, demand deposit accounts permit an individual to deposit to and pull out reserves or funds right away, at whatever point one needs “on-request,” in actuality. The monetary establishment doesn’t need notification ahead of time or charge an expense for allowing you to get to the assets or access the assets, ideal for incessant or regular necessities. Demand deposits, for the most part, appear as checking or saving bank accounts.

The fundamental disadvantage of this is that they offer practically zero revenue in the cash in them. That is the value you pay for the assets being promptly accessible or available.

Term deposits and demand deposits allude to two unique kinds of deposit accounts at a monetary foundation.

Term deposits, otherwise called time deposits, are investment deposits made for a foreordained period, going from a couple of months to a long-term.

Demand deposit accounts offer more prominent liquidity and straightforward entry when contrasted with term deposits.

Also, see:

Banking and Its Types

Important Questions Class 12 Economics Chapter 7

Important Questions Class 12 Economics Chapter 1

Money Creation by Banking System

Limits to Credit Creation and Money Multiplier

Determination of the Exchange Rate

Policy Tools to Control Money Supply

Leave a Comment

Your Mobile number and Email id will not be published. Required fields are marked *