What does deposit mean?
A deposit is the amount of money you give to a financial institution, such as a bank, to hold for you in an account. Individuals and businesses make deposits every day by transferring their funds into banking accounts. Depending on the account type, depositors can earn interest on their money. Deposits can be made on a one-time or recurring basis.
The word "deposit" can also refer to money that you pay upfront to secure receipt of a good or service. For example, a renter may be asked to pay their landlord a security deposit before moving in.
Types of deposits
When you deposit money into your account, that money belongs to you. You can withdraw it and transfer it, but there may be limitations depending on the type of deposit you make.
The two main types of deposits are:
Demand deposits, which allow you to withdraw your funds on demand. Demand deposit accounts are most commonly associated with checking accounts, and some accounts may require up to six days of notice prior to withdrawal. These types of accounts typically pay little or no interest due to the flexibility they offer.
Time deposits, which means you cannot move your deposits for a set period of time unless you pay an early withdrawal penalty. In exchange, a bank or credit union will pay you a higher interest rate on those funds for the duration of the term. One common time deposit account is a certificate of deposit.
Are my deposits safe?
To make a deposit, you’ll need to first open a banking account at a financial institution, such as a bank or a credit union. Before you do so, check to see if the institution is insured.
The Federal Deposit Insurance Corp. and the National Credit Union Administration are independent agencies that offer deposit insurance for federally insured banks and credit unions. The insurance kicks in when the rare failure of a bank or credit union occurs. A failure typically occurs when the institution is no longer able to fulfill its obligations, such as during a bank run.
Both insure only deposit accounts — such as checking and savings accounts, as well as certificates of deposit.
Each person is insured for $250,000 per institution, per ownership category. Common types of ownership categories include single-owned accounts, joint accounts and certain retirement accounts.
Direct deposits
Direct deposits refer to an electronic transfer of funds from one bank account — belonging to an individual or an organization — to yours. The payment goes through an automated process, and it requires you to share your bank routing number and account number with the other party.
One reason people choose to receive direct deposits is the convenience it offers. For example, many employers will offer employees a direct deposit option to receive their pay. Instead of getting a check or cash, the funds will be transferred electronically into your bank account. Some accounts offer early direct deposit, giving you access to your paycheck up to two days in advance.
Or if you received a tax refund from the IRS, you can opt to receive it via direct deposit. Rather than waiting for a check to come in the mail, you could have access to the funds within days.
How to make a deposit
There are several ways to make a deposit, which can vary based on how and where you want to transfer your funds. Most people deposit funds by transferring cash to their account or cashing a check.
If your account is with a traditional financial institution, you can deposit cash and checks at one of their physical branches or ATMs. Many institutions also allow mobile check deposits through their app.
However, depositing cash at an online bank is more complicated and requires creative workarounds, such as depositing the funds into an account at a traditional institution and transferring it.
FAQs
A deposit is essentially your money that you transfer to another party, such as when you move funds into a checking account at a bank or credit union. In the case of depositing money into a bank account, you can withdraw the money at any time, transfer it to another person's account, or use it to make purchases.
What is a deposit for dummies? ›
A deposit is the amount of money you give to a financial institution, such as a bank, to hold for you in an account. Individuals and businesses make deposits every day by transferring their funds into banking accounts. Depending on the account type, depositors can earn interest on their money.
What does $200 deposit mean? ›
If you make a $200 security deposit, for example, you usually receive a $200 credit limit. However, some card issuers offer a credit limit higher than your security deposit. Eventually, you may be able to increase the card's credit limit by making an additional security deposit or by regularly paying your bill on time.
What is a deposit payment? ›
An optional part of the sales process, a deposit is a specified amount of money (usually a percentage of the total amount) that is paid upfront in order to ensure that the sale will go through and that the products/service will be provided. A deposit is paid by the buyer to the seller before a sale is completed.
What is a deposit simple? ›
Money kept or held in any bank account.
What is deposit in own words? ›
to place for safekeeping or in trust, especially in a bank account: He deposited his paycheck every Friday. to give as security or in part payment.
What is a term deposit for dummies? ›
A term deposit is a fixed-term investment that includes the deposit of money into an account at a financial institution. Term deposit investments usually carry short-term maturities ranging from one month to a few years and will have varying levels of required minimum deposits.
What does deposit mean for kids? ›
A deposit is a sum of money which is part of the full price of something, and which you pay when you agree to buy it. The initial deposit required to open an account is a minimum 100 dollars. Synonyms: down payment, security, stake, pledge More Synonyms of deposit. 2. countable noun.
What is the legal definition of deposit? ›
1 : to place for safekeeping or as security [may the property with the court] ;esp. : to put in a bank account.
Is depositing $1,000 suspicious? ›
If you're headed to the bank to deposit $50, $800, or even $1,000 in cash, you can go about your affairs as usual. But the deposit will be reported if you're depositing a large chunk of cash totaling over $10,000.
When Does a Bank Have to Report Your Deposit? Banks report individuals who deposit $10,000 or more in cash. The IRS typically shares suspicious deposit or withdrawal activity with local and state authorities, Castaneda says.
What is the meaning of amount on deposit? ›
Amount on deposit means the sum of a member's employee and employer contributions and, if applicable, any earnings or losses on those contributions.
How do you explain a deposit? ›
A deposit is a sum of money that is held in an account. It may be secured in a bank for safekeeping or to secure goods for renting or purchase.
What is an example with deposit? ›
Noun Our records show that she made a large deposit to her account earlier in the month. If you return that empty soda can, you'll get back the five-cent deposit you paid when you bought the soda. The rental car company requires a deposit for drivers under the age of 25.
What is a cash deposit? ›
Cash deposits mean adding money to your bank account. Traditionally, you deposit money in your bank by visiting the nearest branch. Another way to deposit money in the bank account is through an ATM-cum-cash deposit machine. You do not need an ATM card to deposit money through ATMs.
What is a term deposit in simple terms? ›
What Is a Term Deposit? A term deposit is a fixed-term investment that includes the deposit of money into an account at a financial institution. Term deposit investments usually carry short-term maturities ranging from one month to a few years and will have varying levels of required minimum deposits.
What is a deposit account in simple words? ›
Deposit accounts are bank accounts that allow you to deposit money and withdraw funds. The four main types of deposit accounts are checking accounts, savings accounts, CDs and money market accounts.
What is deposit for short-term? ›
Short-term FDs give a tenure that ranges from 7 days to 12 months. The interest rate is accrued on the principal amount through the selected tenure, and the total corpus is paid at the maturity date.
