Q: Under Reg. D, a “NOW” account is a type of transaction account. What is a “NOW” account?
A: NOW (negotiable order of withdrawal) accounts allow an unlimited number of third-party payment and other transactions and are classified as transaction accounts under Regulation D. Like ‘‘savings deposits,’’ the depository institution must reserve the right at any time to require seven days’ written notice of an intended withdrawal in order to classify the account as a ‘‘NOW account’’ under Regulation D (in practice, this right is rarely, if ever, exercised). Unlike ‘‘savings deposits,’’ however, NOW accounts are available only to individuals; governmental units; and corporations, partnerships, associations, and organizations that are operated primarily for religious, philanthropic, charitable, educational, fraternal, or other similar purposes and not for profit.
A depositor may access funds in a NOW account in the same manner as a depositor may access funds in a demand deposit account. For example, NOW account holders may use negotiable instruments (checks), drafts, telephonic or electronic orders or instructions, or other similar devices to make payments or transfers to third persons or to others. A NOW account holder may make an unlimited number of transfers to another of his or her accounts at the same institution.
NOW accounts have the following characteristics:
• have no maturity date
• institution must reserve the right at any time to require at least seven days’ prior written notice of an intended withdrawal
• permit unlimited transactions (transfers and withdrawals)
• may be accessed by check, draft, telephonic or electronic order or instruction, or other similar instrument to
– pay third parties or others
– transfer funds to another of the depositor’s accounts at the same institution
• may be held only by individuals, governmental units, and nonprofit organizations
• are classified as transaction accounts under Regulation D