Of the many types of bank accounts available, one type allows you to make withdrawals at any time without having to give your bank a heads-up notice. This type of bank account is called a DDA, which stands for demand deposit account. In other words, you can get your money "on demand," which typically grants you immediate access to your funds. You probably have a DDA if you write checks or use a debit card that's attached to your checking account.
How Does a DDA Account Work?
A DDA is commonly called a transactional account, because of the numerous transactions it facilitates. It's typically designed as the account from which you pay your daily expenses and monthly bills.
A DDA can have joint ownership, such as a checking account you share with your spouse. And although each owner must sign when opening a DDA, it generally takes only one owner to sign for the DDA closure. Each owner can deposit funds into the DDA or withdraw money without getting the permission of the other owner.
Video of the Day
Demand Deposit Vs. Term Deposit
A negotiable order of withdrawal account is another type of checking account, but it's not a DDA. A NOW account is an example of a term deposit account (also known as a time deposit account) instead of a demand deposit account. The difference is that a NOW account may limit your withdrawals and money transfers, and you have to wait for a predetermined time period before you can access your funds without penalty. A money market account is another example of a checking account that's not a DDA.
DDA Withdrawal Options
Before the days of digital banking, and even before the days of debit-card transactions, your DDA withdrawal options were limited. But today you have numerous options for accessing the funds in your DDA, including:
- Check writing. Still used by many DDA users, writing checks to withdraw cash, pay for purchases and make bill payments remains an "old-fashioned" way to access the funds in your DDA.
- Teller transaction. Way back in the day, walking into a bank and up to a teller window was the way to make a withdrawal from a DDA. If you like the face-to-face contact with your banker, tellers will still give you cash from your DDA – at the bank counter or at the bank's drive-through.
- Automatic Teller Machine transaction. The advent of ATMs opened a whole new world for DDA customers. Gone were the days when you had to make sure you made it to the bank to cash a check because most ATMs offer round-the-clock access. Banks issue debit cards for accessing your account at an ATM, from which you can even check your DDA balance. You can generally use your debit card at another bank's ATM, although you'll likely have to pay that bank's ATM transaction fee.
- Online banking. If you set up an online banking account, you don't even have to leave the comfort of your home to make immediate (or scheduled) bill payments from your DDA. Simply by entering your username and password, you can access your account online and pay a bill or make a purchase using your debit card information or your checking account information. Online banking makes it possible to transfer funds from your DDA to another account or check your DDA balance online.
- Mobile app. With your smartphone or tablet, you can use your DDA to pay bills, make purchases or check your account balance.
Some DDAs carry fees, including service charges. Your financial institution may require a minimum balance in your DDA, and you'll owe a monthly fee if your balance dips below this minimum. If you overdraw the funds in your account, you'll likely have to pay an overdraft fee. Some banks have a monthly maintenance fee for their DDA account holders.
Reviewing your bank's fee schedule will let you know exactly what fees you'll owe for your DDA. And be sure to look for the ways your bank may reimburse or override certain fees. You may not have to pay the monthly maintenance fee, for example, if you authorize direct deposits of your paychecks.