Negotiable Order of Withdrawal (NOW)

Key takeaways
* A NOW (Negotiable Order of Withdrawal) account is an interest-bearing demand deposit account that allowed customers to write drafts (checks) against deposited funds.
* NOW accounts differed from regular checking primarily because they could pay interest and often carried a short advance-notice requirement.
* The repeal of Regulation Q in 2011 removed the prohibition on paying interest on demand deposits, making NOW accounts largely obsolete—banks can now offer interest on ordinary checking products.

What is a NOW account?

A Negotiable Order of Withdrawal (NOW) account is a checking-type deposit that earns interest while remaining liquid enough for written withdrawals (checks). It functioned as a hybrid between a checking account and an interest-bearing savings instrument, intended for holders who wanted some return on funds they might need to access quickly.

History and evolution

• 1930s: During and after the Great Depression, U.S. banking rules prohibited payment of interest on demand deposits to limit competition and protect bank margins.
• Mid-20th century: Rising interest rates prompted banks to find ways to attract deposits, including non-monetary incentives and implicit interest (preferential loan rates or lower fees tied to balances).
• Early 1970s: Ronald Haselton developed the NOW account to challenge the interest ban.
• 1974–1976: NOW accounts were first permitted in Massachusetts and New Hampshire, then extended across New England with a 5% interest ceiling and often a seven-day advance-notice requirement.
• 1980: NOW accounts went nationwide.
• 1986: The 5% interest ceiling was removed; higher-yield “Super NOW” accounts appeared.
• 2011: The Dodd-Frank Act repealed Regulation Q, eliminating the prohibition on interest for demand deposits. Banks gained flexibility to offer interest-bearing checking products, and the distinct NOW account largely disappeared.

NOW accounts vs. demand deposit (regular checking) accounts

Main historical differences
* Interest: NOW accounts were allowed to pay interest; demand deposits (traditional checking) could not under Regulation Q.
* Holding/notice period: NOW accounts sometimes required a short advance notice (commonly seven days) for withdrawals; regular checking was intended for immediate access.
* Usage: Both supported check writing and day-to-day transactions, but NOWs were designed to offer a modest return on liquid balances.

After Regulation Q’s repeal, those distinctions faded because banks began offering interest on standard checking accounts and other liquid products. Today, interest-bearing checking and specialty accounts (often with balance or activity requirements) fulfill the same role.

Why NOW accounts fell out of use

When Regulation Q was repealed, the legal advantage of a separate NOW product vanished. Banks could incorporate interest into ordinary checking offerings or create new account types with competitive rates and features, making the separate NOW label unnecessary.

Alternatives available today
* Interest-bearing checking accounts (with or without eligibility conditions)
* High-yield savings accounts
* Money market accounts
* Certificates of deposit (CDs)

Frequently asked questions

What does NOW stand for?
* NOW stands for Negotiable Order of Withdrawal.

Are NOW accounts banned?
* No—NOW accounts are not specifically banned. They became effectively obsolete after Regulation Q was repealed in 2011 because the legal restriction that made them distinct was removed.

What is a demand deposit account?
* A demand deposit account is a bank account from which funds can be withdrawn at any time without advance notice (typically a checking account). They are highly liquid and have historically paid little or no interest until regulations changed.

Bottom line

NOW accounts were an important historical innovation that allowed customers to earn interest on liquid, checkable balances when the broader banking system prohibited interest on demand deposits. After regulatory changes removed that prohibition, banks began offering interest-bearing checking and other liquid products, and the separate NOW account largely disappeared as a distinct product.