March 17, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
FIRST ESTATE: In past centuries, this included the religious leaders and clergy. In modern times, I like to use it in reference to politicians and government leaders who can exert a great deal of control over resources through the coercive powers of government. One historical function of the first estate is to protect the less powerful consumers, taxpayers, and workers of the third estate from the market control typically held by the business leaders of the second estate. It is not uncommon, however, for an unhealthy degree of cooperation between the first and second estates, which often ends up with the enslavement of the third estate (figuratively and literally). At times help is forthcoming from the watchdog journalist of the fourth estate--unless they too have been overtaken by the ruling elite.

Visit the GLOSS*arama


Interest-paying bank accounts maintained by traditional commercial banks, credit unions, savings and loan associations, and mutual savings banks with a minimum time (at least seven days) before deposited funds can be withdrawn. Time deposits come in one of two varieties: (1) savings deposits and (2) certificates of deposit. The minimum time period prevents these accounts from functioning as demand deposits and being widely used as money. Time deposits, along with money market mutual funds, are added to M1 to derive M2.
Time deposits are bank savings accounts with a minimum time requirement before the funds can be withdrawn. In some cases (standard savings accounts), the time requirement is not rigidly enforced. In other cases (certificates of deposit), it is. When enforced, withdrawal of funds before the designated time period results in an interest penalty--a reduction in the interest rate.

The two common types of time deposits are savings deposits and certificates of deposit. Saving deposits include standard savings accounts, passbook accounts, share drafts, and money market deposits. Certificates of deposit pay higher interest rates that normal savings accounts, but require the funds not be withdrawn for a specified time period.

Time Deposits in M2

June 2004 (Billions)


Near Monies4,957.5
Savings Deposits
and Money Market Deposits
Small Denomination
Time Deposits
Money Market
Mutual Funds

Total M2$6,292.7

The table to the right presents recent values for M2 and its two key components, M1 and near monies. Contained with the near monies category are time deposits. Savings deposits (including share deposits, passbook accounts, and money market deposits) are the largest category totalling $3.4 trillion dollars. Certificates of deposit, labeled as "Small Denomination Time Deposits" in the table are almost $800 billion.

Savings Deposits

Savings deposits are standard savings accounts or passbook accounts offered by traditional commercial banks, savings and loan associations, and mutual savings banks. Share drafts at credit unions and money market deposits at all types of banks are also included in this category.

Savings deposits have a legal time requirement of at least seven days, which is seldom enforced. Unlike certificates of deposit, there is no explicit maturity date on savings deposits. These deposits also have limits on the number of withdrawals per month, often with a minimum amount per withdrawal.

Certificates of Deposit

Certificates of deposit are accounts with an explicit maturity date after the date deposit and which typically pay a higher interest rate than that found with standard savings accounts. Maturity dates can range from one week to several years. Longer maturity dates invariably correspond with higher interest rates. If the deposits are withdrawn prior to the maturity date, then an interest penalty is imposed, that is, the interest rate paid on the deposit is reduced.

Certificates of deposit are so name because in the days before computerized record-keeping, depositors received an actual certificate, a document, stipulating the terms of the deposit--maturity date and interest rate.

Liquidity Plus

Time deposits fill an important niche in the world of banking services. First, they provide customers with a significant degree of liquidity. Time deposits are NOT money and are NOT widely used as a medium of exchange. But they can be easily and quickly converted to currency or checkable deposits. Second, time deposits store wealth for customers and provide banks with a pool of funds that can be used for loans. The minimum time requirements gives banks some degree of assurance that the funds will be available for lending.


Recommended Citation:

TIME DEPOSITS, AmosWEB Encyclonomic WEB*pedia,, AmosWEB LLC, 2000-2018. [Accessed: March 17, 2018].

Check Out These Related Terms...

     | savings deposits | certificates of deposit | money market deposits | money market mutual funds | Eurodollars | repurchase agreements | demand deposits | checkable deposits | demand deposits | negotiable order of withdrawal accounts | automatic transfer service accounts | currency | Federal Reserve notes | near monies | plastic money |

Or For A Little Background...

     | money | money functions | medium of exchange | M2 | M1 | saving | liquidity | banks | financial markets |

And For Further Study...

     | money creation | fractional-reserve banking | banking | Federal Reserve System | monetary economics | monetary base | monetary policy | debit card | monetary economics |

Search Again?

Back to the WEB*pedia


[What's This?]

Today, you are likely to spend a great deal of time lost in your local discount super center trying to buy either a set of luggage with wheels or a birthday gift for your aunt. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
Your Complete Scope

This isn't me! What am I?

In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
"If football taught me anything about business, it is that you win the game one play at a time."

-- Fran Tarkenton, Football Player

Supply and Demand
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback

| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster