What is Negotiable Order Of Withdrawal ?

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A Negotiable Order of Withdrawal Account is an interest-earning demand deposit account. A customer with such an account is permitted to write drafts against money held on deposit. A Negotiable Order of Withdrawal Account is also known as a "NOW Account."

Definition

A Negotiable Order of Withdrawal (NOW) account is an interest-bearing demand deposit account. Customers holding this type of account are allowed to write drafts against their deposits. NOW accounts are also known as NOW accounts.

Origin

NOW accounts originated in the United States in the 1970s when banks began offering this type of account to attract more deposits by providing both interest earnings and convenient payment options. The first NOW accounts were introduced by banks in Massachusetts in 1974, and they were later promoted nationwide in 1980 through the Depository Institutions Deregulation and Monetary Control Act.

Categories and Features

NOW accounts are primarily divided into personal and commercial categories. Personal NOW accounts are suitable for individual users, offering convenient payment methods and interest earnings. Commercial NOW accounts are designed for businesses, helping manage cash flow while earning interest. Features include: 1. Interest earnings; 2. Ability to write drafts; 3. Often require a minimum balance to avoid account fees.

Case Studies

Case Study 1: Bank of America introduced NOW accounts in the early 1980s, attracting a large number of individual and small business customers. The flexibility and interest earnings made it a popular choice in the market at the time. Case Study 2: Wells Fargo also launched similar accounts during the same period, helping it maintain competitiveness in the fiercely competitive banking market. By offering NOW accounts, Wells Fargo was able to attract more deposits and increase customer loyalty.

Common Issues

Common issues include: 1. How do NOW accounts differ from regular checking accounts? The main difference is that NOW accounts offer interest. 2. Do all banks offer NOW accounts? Not all banks offer them; it depends on the bank's policies and market demand.

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