#Time deposits.# Time deposits are funds to the credit of customers which, by agreement, are to be left for some specified minimum time or on condition that the bank may require notice in advance of the depositor's intention to withdraw them.

The notice that may be required is usually thirty to ninety days; but only in times of general financial crises or of runs on particular banks is this requirement enforced.

A sufficient deterrent to irregular withdrawal of funds is usually found in the loss of interest if deposits are withdrawn at other than stated times.

The bank's right to require notice makes prudent the investment of a much larger proportion of its deposits and for a longer time; it reduces the proportion of deposits needed for reserves, and yet reduces the danger of a "run" upon the bank in time of financial distress.

These are reasons why banks can and usually do pay interest on time deposits (at from 2 to 4 per cent), as until more recently they rarely did on demand deposits[4].
From the standpoint of the depositor a time deposit is, by its very nature, an investment and not a demand credit available for current monetary uses.