Negotiable Order of Withdrawal Account (NOW)

A negotiable order of withdrawal account, abbreviated NOW account, is a type of interest-bearing deposit account from which the holder can withdraw funds using a negotiable order of withdrawal, an instrument that functions in practice just like a cheque. NOW accounts emerged in the United States as a way for banks to offer customers the convenience of chequing access to an account that still pays interest, something ordinary checking accounts historically were restricted from doing.

Because the instrument used to withdraw funds is technically a "negotiable order of withdrawal" rather than a cheque in the strict legal sense, NOW accounts were historically classified as a type of savings account even though they behave, for everyday purposes, exactly like an interest-paying chequing account.

A NOW account is best understood as a chequing account that was allowed to pay interest at a time when regulations in the United States prevented ordinary chequing accounts from doing so. Banks found a workaround: structure the account technically as a savings account, call the withdrawal instrument something other than a cheque, and the customer gets the best of both worlds, cheque-like access alongside interest earnings.

Today, with most of the old restrictions on interest-bearing chequing accounts removed, the practical distinction between a NOW account and an interest-bearing checking account has largely disappeared, though the NOW account name persists at many institutions and in regulatory terminology.

• It pays interest on the account balance, unlike many traditional non-interest checking accounts.
• It allows withdrawals via a negotiable order of withdrawal, used in practice the same way as a cheque.
• Banks historically could require advance notice, often at least seven days, before a withdrawal, though in practice most NOW accounts are operated with on-demand access.

NOW accounts originated as a product innovation designed around regulatory limits on interest-bearing chequing accounts, and their continued existence as a distinct account category reflects that regulatory history even though the original restrictions that motivated their creation have since been eased.

Although the specific regulatory restrictions that originally motivated the creation of NOW accounts have since been lifted in most of the United States, the account type remains defined in banking law and continues to exist at many institutions, sometimes marketed under its traditional name and sometimes simply folded into a bank's standard interest-bearing checking account lineup. For most depositors today, choosing between a NOW account and an ordinary interest-bearing checking account comes down to comparing the specific features, fees and interest rates each institution offers, rather than any meaningful functional difference tied to the NOW designation itself.

The continued existence of the NOW account category is, in many respects, a historical artefact of how banking regulation evolved, illustrating how a product built around a specific legal workaround can persist long after the original restriction it was designed to address has been removed.

NOW accounts emerged specifically because of Regulation Q, a now-repealed United States banking regulation that, for decades, prohibited banks from paying interest on standard demand deposit accounts. Banks and thrift institutions in the New England region pioneered the NOW account structure in the 1970s as a legally permissible workaround, and the product later spread nationally once legislation formally authorised it more broadly, eventually paving the way for the elimination of the broader interest-on-checking restriction entirely in the following decades.

This history illustrates a recurring theme in financial regulation: a specific, narrowly targeted restriction can spur genuine product innovation as institutions find legally compliant ways to offer customers something the broader rule did not anticipate or intend to prevent.

Some institutions still market a distinct "Super NOW" account category, historically referring to a version of the NOW account introduced later that was not subject to certain interest rate ceilings applied to standard NOW accounts, though this distinction has become largely obsolete as broader interest rate restrictions were phased out.