What Is a NOW Account? Answers to Your Questions

A NOW account, short for Negotiable Order of Withdrawal account, is a type of interest-bearing bank account that allows customers to write drafts, similar to checks, against deposited funds. However, there may be instances where a bank will refuse to open a NOW account for a business. In this article, we will explore the reasons for such denials and provide comprehensive answers to common questions about NOW accounts.

Why would a bank refuse to open a NOW account for a business?

A bank may refuse to open a NOW account for a business for the following reasons:

Eligibility criteria

For-profit organizations, such as corporations, partnerships, associations, and business trusts, are generally not eligible for NOW accounts. NOW accounts are typically designed for individuals, including sole proprietors and those doing business under a trade name (DBA).

Legal Restrictions

Banks must comply with legal and regulatory requirements when opening accounts for businesses. There may be specific restrictions or considerations that prevent certain types of businesses from opening NOW accounts.

Understanding NOW Accounts

Interest Earning Potential

One of the key features of a NOW account is that it allows the account holder to earn interest on deposited funds. The interest rate may vary depending on the bank and prevailing market conditions.

Check Writing Privileges

With a NOW account, account holders have the convenience of writing drafts (checks) against funds available in their account. This feature allows businesses to make payments to vendors, suppliers, or employees.

Individual or DBA NOW Accounts

While businesses such as corporations or partnerships are not eligible for NOW accounts, an individual operating as a sole proprietor or under a trade name (DBA) may maintain a NOW account. The account must be in the name of the individual or DBA.

Legal Restrictions and Requirements for NOW Accounts

There are certain legal restrictions that apply to NOW accounts. These restrictions are in place to ensure compliance with banking regulations and to protect consumers and financial institutions. Some of the common regulatory restrictions include

  1. Eligibility requirements: NOW accounts are generally available to individuals, including sole proprietors and those operating under a business name (DBA). However, for-profit organizations such as corporations, partnerships, associations, and business trusts are generally not eligible for NOW accounts.
  2. Federal Reserve Regulation D: NOW accounts are subject to the requirements of Federal Reserve Regulation D, which imposes certain limitations on the number of transactions that can be made from the account each month. The purpose of this regulation is to maintain the distinction between transactional (checking) accounts and savings accounts.
  3. Reporting requirements: Financial institutions must comply with various reporting requirements, including the reporting of interest earned by account holders. This information is reported to the Internal Revenue Service (IRS) for tax purposes.
  4. Anti-money laundering (AML) regulations: Banks must comply with anti-money laundering regulations to prevent illegal activities such as money laundering and terrorist financing. These regulations require financial institutions to implement robust customer identification and verification procedures.
  5. Know Your Customer (KYC) requirements: Banks have a responsibility to know their customers and understand the nature of their business activities. They are required to collect and verify certain information about their customers, including identification documents and proof of business legitimacy.
  6. State-specific regulations: In addition to federal regulations, individual states may have their own specific laws and regulations governing NOW accounts. These state-level regulations may include additional eligibility criteria, transaction limits, or disclosure requirements.

It’s important for both banks and account holders to be aware of and comply with these legal restrictions associated with NOW accounts. Banks have a responsibility to comply with these regulations to ensure the integrity and security of the banking system, while account holders should understand the eligibility criteria and transaction limits to make informed decisions about their banking needs.


A NOW account offers businesses the opportunity to earn interest on their deposits while providing the convenience of check-writing privileges. However, eligibility requirements and legal restrictions may prevent certain types of businesses from opening NOW accounts. It is important for business owners to understand the specific requirements and policies of their chosen bank when considering a NOW account. This will allow them to make informed decisions that meet their financial needs and goals.


What is a NOW account answers?

A negotiable order of withdrawal account (NOW) is an interest-earning bank account in which the account holder can write checks against the balance. Most mutual savings banks, commercial banks, savings and loan associations, and credit unions offer NOW accounts.

Can a bank change the funds availability policy for a business checking account?

Yes, banks have the authority to establish and change their funds availability policies, including those related to business checking accounts. It is advisable for business owners to review their bank’s terms and conditions regarding funds availability.

When are funds available or released from a hold after a check is deposited?

The availability of funds after depositing a check can vary depending on factors such as the type of check, the amount, and the bank’s policies. Banks are required to provide disclosures that explain their specific funds availability schedule, which outlines when funds will be available for withdrawal.

Are there exceptions to the funds availability (hold) schedule?

Yes, there are exceptions to the funds availability schedule. For example, certain types of deposits, such as electronic funds transfers or checks drawn on the same bank, may have different availability rules. It is important to check with your bank for specific details regarding exceptions to the funds availability schedule.

What is the meaning of NOW account?

A NOW account, otherwise known as negotiable order of withdrawal account, is an interest-earning bank account whereby the owner may write drafts against the money held on deposit. Mutual savings banks, commercial banks, and savings and loan associations offer NOW accounts.

Is a NOW account considered money?

NOW accounts were structured to comply with Regulation Q. NOW accounts are considered checkable deposits, and are counted in the Federal Reserve Board’s M1 definition of the money supply, as well as in the broader definitions. Like all other bank deposits, they are liabilities from the bank’s perspective.

Who can have a NOW account?

A NOW account is an interest-earning bank account with which the customer is permitted to write drafts (similar to checks) against money on deposit. However, an individual doing business as (DBA) a sole proprietor or under a trade name (e.g., Joe Smith doing business as “Smith Enterprises”) can maintain a NOW account.

Does a NOW account earn interest?

A NOW account is a negotiable order of withdrawal account. It is a checking account that earns interest. These accounts allow banks to require that customers provide at least seven days’ notice before withdrawals.

What is a NOW account quizlet?

NOW (Negotiable Order of Withdrawal) accounts. savings deposits against which a customer can write negotiable drafts (checks) but that reserve the depository institution’s right to insist on prior notice before the customer withdraws funds.

What is a benefit NOW account?

BenefitNOW is an interest bearing draft account. By simply writing a draft you have immediate access to your funds whenever you need them. Payment via BenefitNOW does not alter surrender value of contract. A BenefitNOW may not be available in all states or with some products.

Is a NOW account a checking account?

NOW accounts are essentially checking accounts where you earn interest on the money you have deposited. With a NOW account, the bank or credit union has the right to require at least seven days written notice of a withdrawal, though this is rarely done.

Is a NOW account a demand deposit account?

What Is a Negotiable Order of Withdrawal (NOW) Account? A Negotiable Order of Withdrawal Account is an interest-earning demand deposit account. A customer with such an account is permitted to write drafts against money held on deposit. A Negotiable Order of Withdrawal Account is also known as a “NOW Account.”