Since the FDIC Tag program expired we are looking at offerring an interest checking for account that were not eligible for a NOW account in the past prior to the Reg Q change.

Other than the ability to have some additional FDIC Insurance coverage by having a Interest bearing checking account and a NOW account, along with the 7 day withdrawal requirement how viable are offerring NOW accounts.

I would like to know how other banks have approached the changes regarding offerring interest checking to businesses and how NOW accounts are marketed in todays environment.

Im not sure I understand this

"Other than the ability to have some additional FDIC Insurance coverage by having a Interest bearing checking account and a NOW account, along with the 7 day withdrawal requirement how viable are offerring NOW accounts."


Two different "kinds" of accounts don't add up to extra FDIC insurance if they are in the same "ownership category." For example, if I'm a single owner of both types of accounts my maximium coverage is still $250,000.

NOW account qualification requirements have not changed. You can still depend on Reg D §204.130 in that regard. An interest-bearing DDA has no ownership restrictions.

NOW accounts must include a reservation of right to require 7 days' notice of intended withdrawal. You cannot include such a provision on a DDA.

The type of account is irrelevant (except for government accounts) to FDIC coverage amounts, as StevenD has pointed out.

For government accounts (which may be in NOW accounts), NOW accounts are considered savings accounts; an interest-bearing DDA account would be counted as a DDA for FDIC purposes.

So what is the advantage to banks to still offer NOW accounts? Why not just offer interest-bearing checking and not have to worry about or test for NOW account eligiblily?

Reserve requirements.

Mgmt wants to get rid of our mmkt (&NOW) accounts, but continue to offer the account as an interest earning account (tiered) and keep the withdrawal limitations that we currently have of 6 for the business side... we would of course disclose the new account terms, in advance... We would not reserve 7 days notice requirement..

My question is this, Can we do this and still classify it as a DDA account?

So, you are saying that they want to keep the transaction limitations in place and just pay the additional reserves on all these accounts? There is a real disconnect here some where????

Yep... They want to prevent our corporate accounts which pay per debit fees from jumping over to earn interest and avoid the per debit fees...

Sorry, I don't under stand the reasoning? What does paying interest and debit fees have in common?

Are they trying to create a product but make it less than attractive so customers will not switch?

They are trying to get away from having so many different types of products. We currently offer mmkt & NOW, they don't want to upset customers, so they will continue to pay interest, and keep limitations, but reclassify it so that it is just an interest earning checking, which is my main question, when you put withdrawal limitations on a DDA, can it still be a DDA/transaction account? I offered the reserve requirements argument, but they said that wouldn't be a problem.

And by keeping withdrawal limitations will prevent corporate accounts from jumping ship and earning interest- the corp. accounts pay per debit fee and do not earn interest. If they were to switch to the former mmkt, will be interest checking (business), we would lose the per debit fee and they would also be earning interest.

You can't impose transaction limits on a demand deposit account. It's a contradiction in terms.

thank you John. It didn't make sense to me either (but I am extremely new to compliance, and have learned so much from BOL)... any suggestions?