Difference b/w NOW & Interest Bearing Business?

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Question:

What is the difference between a NOW account and an interest bearing business checking account and what entities can open a NOW account?

Answer:

The term "checking account" is generic term that comprises NOW accounts, demand deposit accounts (DDAs), and ATS accounts.

Nothing has changed with respect to NOW accounts, except, perhaps, demand for them. The same ownership restrictions apply (check out Federal Reserve Board Regulation D, section 204.130, for a detailed list of eligible persons, including entities.

ATS accounts are still offered by a few banks. They are savings accounts, owned only by individuals, that are typically linked to a DDA. When the balance in the DDA drops below a low-balance limit (one such limit is $0), a transfer is automatically made from the ATS account to bring the DDA balance back above the trigger balance.

There are no regulatory restrictions on activity in a NOW or ATS account.

For both NOW and ATS accounts, the financial institution must reserve the right to require advance notice of withdrawal.

For a demand deposit account (DDA), there are no ownership restrictions imposed by law or regulation. And there can be no requirement for advance notice of withdrawal, reserved or otherwise.

All three accounts may earn interest.