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Highlights
- A NOW account is an interest-bearing deposit account that allows check writing.
- Offered by commercial banks, mutual savings banks, and savings and loan associations.
- Available exclusively to individuals, certain nonprofits, and government entities.
A Negotiable Order of Withdrawal (NOW) account is a type of deposit account that combines the features of a checking account with the benefit of earning interest. Unlike traditional checking accounts that typically do not earn interest, NOW accounts provide account holders the opportunity to earn returns on their deposits while maintaining the flexibility to write checks for withdrawals. This makes the NOW account an attractive option for individuals and organizations seeking both liquidity and modest income from their balances.
NOW accounts are commonly offered by a variety of financial institutions, including commercial banks, mutual savings banks, and savings and loan associations. However, their availability is regulated, and only certain types of account holders can open them. Eligible owners include individuals, specific nonprofit organizations, and government units, but corporations and other commercial entities generally cannot hold NOW accounts.
The convenience of NOW accounts lies in their negotiable nature, meaning checks drawn on these accounts can be transferred or negotiated to a third party. This feature provides account holders with transactional flexibility similar to that of regular checking accounts, but with the added advantage of earning interest on their funds. The interest rates on NOW accounts vary depending on the institution and prevailing market conditions but generally offer a modest return compared to other interest-bearing accounts.
Conclusion
Negotiable Order of Withdrawal accounts provide a unique blend of check-writing convenience and interest earnings for eligible account holders. By bridging the gap between checking and savings, NOW accounts offer a practical solution for managing accessible funds while generating income.
