What are checkable deposits?

A checkable deposit means any deposit held at a bank or another financial institution that is highly liquid and thus can be accessed at any point of time on the issuance of a cheque. 

Although sometimes used interchangeably, there is a key difference between demand deposits and checkable deposits. While both provide clients with ability to access cash on demand, demand deposits typically have a limit on the amount of cheques that can be written. Checkable deposits, on the other hand, have no limitations on transferability. 

How checkable deposits work

To define a checkable deposit in more detail, let’s look at a checkable deposit example below.

Imagine you need to withdraw $20,000 from your bank account and write a cheque to access the cash for purchasing a car. On receiving the cheque, the bank must provide you the amount requested for your endeavours. This is an example of a checkable deposit.

Different types of checkable deposits

There are numerous types of checkable deposit accounts, including current (UK) or checking (US) accounts, savings accounts and money market accounts. 

• Current (checking) account

A current account (UK) or checking account (US) is any bank account where you can deposit money and withdraw it via cheques, e-cheques, drafts, debit cards or automated teller machines (ATMS). These will also provide you with information on your account. This type of account is an excellent alternative to carrying cash, since it gives you the freedom to conduct monetary transactions anywhere, anytime, without the need to pay physical money.

• Savings account

A savings account, as the name suggests, is primarily used to save funds for later purchases such as a car or to make a downpayment on a mortgage. It is largely used to save for bigger financial expenses or targets, such as retirement.

• Money market account

Finally, a money market account is a deposit account that requires a higher balance. These types of accounts are lucrative as they offer higher returns; you can also earn dividends on the basis of current market rates.

Money market accounts can be utilised for saving for emergencies or for making a large purchase. The cash can be assessed via cheques or through debit cards. These kinds of accounts, however, have limitations on the number of cheques you can write within a month to access the funds.

Pros and cons of checkable deposits

An advantage of a checkable deposit account is that the cash can be accessed anytime due to its liquid nature. In addition, the different types of checkable deposit accounts may make saving and spending simple and easy to keep track of.

A disadvantage of checkable deposits would be the fact that these are not ideal for long-term financial targets, such as retirement, due to lower returns.

In addition, several checkable deposit accounts come with bearing fees and limitations on the number of cheques you can write, which may not be ideal for someone who requires frequent withdrawals.