What is NOW and Super NOW?

 What is the Negotiable Order of Withdrawal Account (NOW)?

• A NOW account, also known as Negotiable Order of Withdrawal Account, is a deposit account that pays interest and allows the account holder to write drafts against the money held in the account.
• NOW accounts are offered by commercial banks, mutual savings banks, loans, and savings associations. Banks may expect an account holder to provide a 7-day notice period in advance of cash withdrawal to meet the withdrawal request.
• However, the notice period is exempt from small withdrawals.
• The US banking regulation defines the term “demand deposit” and “NOW” differently even though, both are similar. Historically, interest was banned on a demand deposit account and in NOW interest payment plays a significant role.

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What is Super NOW?

• “Super negotiable order of withdrawal account” commonly known as a Super NOW account, is a combination of NOW account and money market account that allows the account holder to write drafts against the money held in the account.
• A Super NOW account has exact features of the NOW account however, it provides a higher interest rate. It carries a higher interest rate than the NOW account but lowers interest rate than money market account i.e. the interest rate paid is between NOW and money market account.

History

• During the Great Depression in the 1930s, the Banking Act prevented banks from paying interest on demand deposits as it was deemed to be one of the reasons in reducing profits and an increase in a bank failure.
• The ban was introduced to reduce the competition between the banks that offered a higher interest rate to attract customers without focusing much on their financial strength.
• In the 1970s, the NOW account was created in certain parts of England that allowed interest payment on checking accounts also known as a current account.
• It had two conditions interest rate will be restricted to 5% and 7-day prior notice to be given before withdrawal. Later the ceiling limit was abolished and NOW became popular worldwide.
• In 2011, the ban on interest on demand deposits was eliminated. NOW accounts had importance earlier in the absence of interest paid on demand deposits.
• After the ban has been removed there is a very little difference in demand deposit, NOW or Super NOW account.

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Author: Swati Krishnamurthy

About the Author:

Swati is a freelance writer. She is a Financial Quality Compliance specialist having an integrated knowledge and experience in Logistics, Audit, and Risk-mitigation for manufacturing and service sectors. Her passion for finance grew as she scored centum in financial management during her master’s degree. She’s a classical dancer who performs to express complex emotions through negotiable ordered dancing and writes to express complex concepts into simple words.

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