Answer:
Both account types get their pedigree from Regulation D, 12 CFR 204. In effect, "NOW" and "money market deposit" are legal terms.
NOW is an acronym that stands for "negotiable order of withdrawal." It is a transaction account and, thus, is subject to the highest reserve requirements imposed by Regulation D. NOW accounts earn interest and account holders can write as many checks as they want on the account. There are restrictions on NOW account eligibility which must be enforced by the financial institution. Generally, they can only be held by individuals, non profit entities and governments. (A sole proprietorship is considered to be an individual account.) At one time, Regulation D defined a "Super NOW" account, but that classification no longer exists except as a marketing term that means different things to different institutions.
A money market deposit account (MMDA) is a savings account under Regulation D and is thus subject to lower reserve requirements than transaction accounts. While any entity can have a MMDA, there are restrictions on activity which the financial institution must enforce. Generally, there can be no more than six withdrawals per calendar month or statement cycle, no more than three of which can be by check, draft or debit card. Truth in Savings requires that banks disclose the restrictions on activity.
First published on BankersOnline.com 2/11/02
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