A savings account from which withdrawals can be made by negotiable orders of withdrawal (functional equivalent of checks). This is an interest-bearing account for which the bank must reserve the right to require the depositor to provide at least seven days notice of his/her intent to withdraw money.
For profit organizations are not eligible for NOW accounts. They include:
- corporations
- partnerships
- associations
- business trusts
Individuals doing business as a sole proprietorship or under a trade name can open up a NOW account.
NOW accounts were popular before Dodd-Frank was signed into law. These were popular accounts since Regulation Q, which was repealed by Dodd-Frank, prohibited banks paying interest on demand deposit accounts. Since the repeal, the advantage that NOW accounts offered diminished.
NOW accounts have three mandatory characteristics.
- a NOW account must be one where the depository institution has reserved the right to require at least seven days' written notice prior to the withdrawal or transfer of any funds in the account.
- a NOW account must be subject to check, draft, negotiable order of withdrawal, share draft, or other similar item for the purpose of making transfers to third parties.
- NOW accounts may only contain funds belonging to individuals, nonprofit organizations, or public funds of governmental units.
They now are mostly a thing of the past.