Okay, for all of you who may think this is a very basic question, I need help.

We recently created a DDA account for the good ol' 55 and older crowd. We have decided to pay interest based on a tier system. I looked at Reg D and Reg DD to see about what the rules of paying interest on demand deposit accounts are. The only thing that I am finding is where Reg D talks about paying interest on MMDA and I found the eligibility requirements for a NOW account. What are those for a plain ol' interest bearing DDA account?

Any help would be appreciated because we are rolling this out in a couple of weeks and I am brain dead.

You cannot pay interest on a DDA account. They will need to be classified as NOW accounts.

The problem here is "street" definitions vs. technical ones. Banks run NOW (and often MMDA) accounts on their DDA systems. And many banks refer to their NOW accounts as "checking" accounts (I've seen one bank that calls theirs "Interesting Checking"). Consumers think of NOW accounts as checking accounts, rather than savings accounts, which is technically what they are.

So bankers frequently refer to anything on their DDA systems as DDA accounts, whether or not they earn interest.

Technically, DDA means Demand Deposit Account, and only includes non-interest bearing checking accounts and a few odds and ends in the definitions in Regulation D, §204.2.

And so far, it's illegal to pay interest on a demand deposit account.

The Bonus on Accounts article will help you understand these restrictions and requirements.

Thanks guys. All is well, I talked with the new accounts manager this morning and she assured me that it is a NOW account. I guess they discussed this during the one meeting I was out on vacation.