Super NOW Account

A super NOW account is a demand deposit account that offers a higher interest rate than a NOW account but lower interest than a money market account. NOW accounts (negotiable order of withdrawal) are basically checking accounts that draw interest.

Specific requirements for super NOW accounts, such as minimum deposits and interest rates, vary among banks. This is due to the 1986 deregulation of bank deposit accounts. Today, banks can charge interest based on their costs and competitive requirements. Super NOW accounts combine NOW accounts with money market accounts.

A negotiable order of withdrawal account is an interest-earning bank account. The Banking Act of 1933 banned banks from paying any interest on deposits that were payable on demand. As interest rates rose in the 1950s many banks began trying to get around the ban. This started with nonpecuniary rewards, such as offering more convenient features including additional branch offices, along with giveaways of consumer goods to attract new customers. Implicit interest also gradually gained traction. This included preferred loan rates. Banks often correlated these with a customer's demand deposit balances. Banks also began to display below-cost charges for common services, such as check-clearing.

In 1974, Congress allowed NOW accounts in Massachusetts and New Hampshire and expanded it to all of New England two years later. 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.”

While a negotiable order of withdrawal is essentially identical to a check drawn on a demand deposit account, U.S. banking regulations define the terms "demand deposit account" and "negotiable order of withdrawal account" separately. And until July 2011, Regulation Q stated that a demand deposit could not pay interest. NOW accounts were structured to comply with Regulation Q.

Legally speaking, banks have the right to require seven days’ notice of withdrawals from a NOW account — a feature that is rarely exercised. While NOW accounts have been able to circumvent interest rate bans, Regulation Q still prohibits financial institutions from paying interest on demand deposits. In lieu, a bank may offer an account holder cash or credit payments, along with merchandise when opening an account. For a demand deposit an account holder may not receive greater than two payments annually, and the value of each payment cannot exceed $10 for deposits under $5,000 and $20 for deposits exceeding $5,000.