What type of account is a NOW account?

A NOW account, which stands for Negotiable Order of Withdrawal, is indeed a checking deposit account that earns interest. This type of account allows the account holder to write checks while simultaneously earning interest on the balance held within the account. NOW accounts were created to encourage individuals to keep their funds in a checking account rather than transferring them to a savings account for interest earnings.

This feature of providing both liquidity, through the ability to write checks, and the opportunity to earn interest makes NOW accounts distinct among various account types. In contrast, savings accounts typically offer less access to funds and may have limitations on withdrawals or transactions, while certificates of deposit involve locking in funds for a specified term without the flexibility to withdraw or write checks. Money market accounts, while they may offer higher interest rates and some checking features, generally do not share the same characteristics as NOW accounts regarding negotiable withdrawal options.