Business Glossary

interest-bearing transaction account that combines the payable on demand feature of checks and investment feature of savings accounts. A NOW account is functionally an interest paying checking account. The NOW account began in Massachusetts in 1974 when mutual savings banks offered interest bearing transaction accounts (NOW accounts) to compete with commercial banks. These accounts, which paid a rate of interest equivalent to that of passbook accounts (5l/2%), were authorized nationwide for all depository institutions by the 1980 Monetary Control Act.