Legal Definitions - NOW account

A NOW account stands for a Negotiable Order of Withdrawal account. It is a type of deposit account offered by banks and credit unions that combines features of both a checking account and a savings account. Specifically, it allows the account holder to write an unlimited number of checks (negotiable orders of withdrawal) while also earning interest on the deposited funds. These accounts are typically available to individuals, certain non-profit organizations, and government entities.

Here are some examples to illustrate how a NOW account works:

• Example 1: Personal Financial Management

  Sarah, a freelance graphic designer, wants to manage her daily expenses and also earn some interest on her money. She opens a NOW account at her local bank. This allows her to pay her rent, utility bills, and grocery expenses by writing checks or using her debit card, just like a regular checking account. At the same time, the balance in her account accrues a small amount of interest each month, providing a modest return on her funds before they are spent.

  This example illustrates how an individual can use a NOW account for everyday transactions while simultaneously benefiting from interest earnings, combining the liquidity of a checking account with the interest-bearing feature of a savings account.

• Example 2: Non-Profit Organization Operations

  The "Green Earth Foundation," a small non-profit dedicated to environmental conservation, receives donations and needs to pay for operational costs like office supplies, event rentals, and staff salaries. They open a NOW account. This enables the foundation's treasurer to easily write checks to vendors and employees as needed, ensuring smooth operations. Additionally, any funds sitting in the account before being disbursed earn interest, which can then be used to further their mission or cover minor administrative costs.

  This example demonstrates how a qualified non-profit organization can utilize a NOW account to manage its operational finances efficiently, allowing for frequent transactions while also maximizing the value of its funds through interest accrual.

• Example 3: Local Government Agency Funds

  The City of Willow Creek's Parks and Recreation Department manages a budget for maintaining public parks and organizing community events. They hold their operational funds in a NOW account. This allows the department to issue checks to landscapers, event suppliers, and part-time staff without restriction. During periods when funds are temporarily held before major expenses, such as seasonal park maintenance or large event deposits, the account earns interest, providing a small additional revenue stream for the department's public services.

  This example highlights how certain government entities can use a NOW account to handle their day-to-day financial transactions, benefiting from both the flexibility of unlimited withdrawals and the advantage of earning interest on public funds.