Skip to content

Eradicating NOW Accounts-Any Negatives/Cons?

We're looking into eradicating NOW accounts. So far, there hasn't been any real negative discovered with making this change - other than some maintenance in the beginning. Is there something drastic we could be overlooking?

by Veneshia Ferdinand:

In this interest rate environment nothing drastic. Are you looking at converting your existing NOW accounts to another interest bearing account? Are converting it to a Money Market Account (MMKT) or a non-interest bearing account? If you convert them to MMKT accounts consider the transaction restrictions under Regulation D.

Moving forward you just have to make sure to completely 'eradicate' the reference to NOW accounts in your future disclosures, website, deposit systems, call reports, and so on. Beware of those employees who just want to hang on to an old version of disclosures just because! Do check with your systems admin to see if the mass change can be made on your core system for existing NOW accounts, check your NOW account disclosures and notify all account holders. If your system will allow you to change the account name and code only, assuming you are not changing their account numbers that should not affect customers with direct deposits or automatic bill payments.


by John Burnett:

It sounds more like the intent is to stop offering NOWs and start offering interest-bearing DDAs. And this is a move that lots of banks will consider as rates trend upward and businesses, which can't hold NOWs, start clamoring for interest on their checking accounts. It's just a really good opportunity to dump the NOW with its compliance challenges (ownership restrictions). The transition from NOW to interest-bearing DDA can be smooth (change a class code here and there and check to make sure the NOW balances flow to the DDA section of your Call Report), and if there's no other change other than removing the contractual reservation of right to require advance notice of withdrawal, no Reg DD requirement for customer notices.

I'd still let customers know what you're doing -- some customers actually look at their bank statements and if the name of their account changes from NOW Checking to Checking with Interest or DDA with Interest, they WILL call to ask what's going on.

And before you start offering interest-bearing DDAs to businesses, make sure you review your pricing.

First published on 04/08/2018

Filed under: 
Filed under compliance as: 

Search Topics