Business, Legal & Accounting Glossary
A time deposit is a money deposit at a bank that can not be withdrawn for a certain “term” or period of time. When the term is over it can be withdrawn or it can be held for another term. The longer the term the better the yield on the money. A certificate of deposit is a time deposit product.
Note that M2 includes funds that can be used directly in payment, such as money market mutual funds and money market deposit accounts (MMDAs). MMDAs are considered by the Federal Reserve to be savings accounts and thus are exempt from reserve requirements. The fact that these large transaction accounts are not included in M1 suggests that the Fed no longer pays much attention to ordinary transaction deposits. In fact, in July 2000, the Federal Reserve announced that it was no longer setting target ranges for growth rates of the monetary aggregates.
“Small” time deposits in M2 (see money supply) are defined as those under $100,000. That figure is also the limit on FDIC insurance coverage.
“Large” time deposits are currently defined as deposits larger than $100,000, which is also the FDIC insurance limit.
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This glossary post was last updated: 13th February, 2020 | 0 Views.