These accounts generally have unlimited check writing abilities (unlike money market deposits) and while the bank can legally require seven days written notice prior to the withdrawal of funds, this requirement is almost never enforced. Unlike demand deposits, NOW accounts can only be issued to individuals, nonprofit organizations, and sole proprietorships. Corporations are explicitly prevented from having NOW accounts.

Some Recent Numbers

A New Kid on the Block

In fact, these accounts were so named in large part to skirt banking regulations that existed when they were first issued. Negotiable order of withdrawal is really nothing more than a euphemism, or technical description, of what a traditional "check" is. A check is an order to the bank to withdraw funds, the amount of which is negotiated between the depositor and the party receiving the payment. In effect, ALL checks are really "negotiable orders of withdrawal."

With high rates of inflation and high interest rates, banking customers looked for ways to retain liquidity (as in spendable money) while also generating interest payments. NOW accounts were offered to meet this need and to attract deposits to savings and loan associations and mutual savings banks. While such accounts skirted existing banking regulations they became legal in the 1980s. With this legality, traditional commercial banks jumped on the competitive bandwagon and also began issuing NOW accounts.

A Couple of Others

• Share Draft Accounts: Credit unions got into the competitive checking account market by offering share draft accounts. Because "draft" is another term for "check" this too was effectively another type of checking account, but which also paid an interest on the balance in the account.


• ATS Accounts: To remain competitive with the interest-paying "checking accounts" offered by their depository competition, traditional commercial banks began offering automatic transfer services (ATS) accounts. This involved the automatic transfer of funds from a savings account to a checking account to process checks. This service allowed banks to pay interest on the balance of the savings account, even though the savings account effectively functioned as a checking account.