Savings deposits are accounts maintained by banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money. These accounts let customers set aside a portion of their liquid assets that could be used to make purchases. But to make those purchases, savings account balances must be transferred to "transactions deposits" (or "checkable deposits") or currency. However, this transference is easy enough that savings accounts are often termed near money. Savings accounts, as such constitute a sizeable portion of the M2 monetary aggregate.

With savings accounts you can make withdrawals, but you do not have the flexibility of using checks to do so. As with an MMDAs (money market deposit account ), the number of withdrawals or transfers you can make on the account each month is limited.

Growth

Since January 1994, hundreds of banks and other depository financial institutions have implemented automated computer programs that reduce their required reserves by analyzing customers' use of checkable deposits (demand deposits, ATS, NOW, and other checkable deposits) and "sweeping" such deposits into savings deposits (specifically, money market deposit accounts (MMDA)). Under the Federal Reserve's Regulation D , MMDA accounts are personal saving deposits and, hence, have a zero statutory reserve requirement.

Levels

"Checkable deposits" are now (2004) $640.5 billion in the US while "savings deposits" are $3,472.5 billion.

Regulations

Under Regulation D, 12 CFR 204.2(d)(2), the term "savings deposit" includes a deposit or an account that meets the requirements of Sec. 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution , the depositor is permitted or authorized to make up to six transfers or withdrawals per month or statement cycle of at least four weeks. The depository institution may authorize up to three of these six transfers to be made by check, draft, debit card, or similar order drawn by the depositor and payable to third parties.

See also

• Money supply

External links

• Regulation D - Reserve Requirements of Depository Institutions
• St. Louis Fed: Federal Reserve Board Data on OCD Sweep Account Programs
• Retail Sweep Programs and Bank Reserves, 1994-1999 (Transaction deposits with reserve requirements being converted to personal-saving deposits (MMDA) with no reserve requirement)
• High Interest Savings Accounts in Canada