Glossary term
Negotiable Order of Withdrawal (NOW) Account
A NOW account is an interest-bearing deposit account that allows checks or similar withdrawals but legally remains distinct from a demand deposit account.
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What Is a NOW Account?
A Negotiable Order of Withdrawal account, usually called a NOW account, is an interest-bearing deposit account that allows checks, drafts, or similar withdrawal orders. It functions much like a checking account for many customers, but it is legally distinct from an ordinary demand deposit account.
The key technical difference is notice. A bank or credit union may reserve the right to require advance notice before funds are withdrawn from a NOW account, even though in everyday practice these accounts are commonly used for transaction activity.
Key Takeaways
- A NOW account is an interest-bearing transaction account.
- It can allow checks, drafts, or similar withdrawal orders.
- It is legally different from a standard demand deposit account.
- Consumers should compare fees, access, interest, insurance coverage, and account restrictions.
How a NOW Account Works
A NOW account combines features that many people associate with checking and savings. It can pay interest, and it can also be used to make payments to third parties. Historically, NOW accounts developed partly because banks faced restrictions on paying interest on ordinary demand deposits. Those historical rules have changed, but the account category still exists.
For a consumer, the practical experience may feel similar to an interest checking account. The account may come with checks, debit access, electronic transfers, online bill payment, or other standard banking features, depending on the institution's terms.
Account Type | Core Feature | What to Compare |
|---|---|---|
NOW account | Interest-bearing transaction account with notice-right structure. | Fees, interest, access, and withdrawal terms. |
Checking account | Demand deposit account used for everyday payments. | Monthly fees, overdraft terms, and payment tools. |
Savings account | Deposit account mainly used for storing funds. | Interest rate, transfer rules, and liquidity. |
Money market deposit account | Interest-bearing deposit account with transaction features. | Minimum balance, yield, and access limits. |
Deposit Insurance and Account Terms
NOW accounts at FDIC-insured banks or NCUA-insured credit unions can be covered by deposit insurance, subject to the usual ownership categories and limits. The account label does not remove the need to confirm the institution, ownership structure, and total insured balances.
Account terms still matter. A NOW account may pay little interest after fees, or it may require a minimum balance to avoid charges. Consumers should compare the actual annual percentage yield, monthly fees, transaction tools, and any restrictions before treating it as better than a standard checking account.
Why the Name Feels Odd
The phrase negotiable order of withdrawal is a legal and banking term, not everyday consumer language. It refers to the account's withdrawal-order structure. In ordinary use, many customers simply experience the account as an interest-bearing account that can be used for payments.
The Bottom Line
A NOW account is an interest-bearing transaction account with a distinct legal structure. It can be useful, but the practical value depends on the account's yield, fees, access, and deposit-insurance fit.