What is a Notice of Withdrawal?
The term “notice of withdrawal” is used in several different senses. In the finance sense, the meaning this article is concerned with, it involves a written notice submitted to indicate the intent to withdraw money from a bank account. However, this term is also used in the legal community. When someone wants to withdraw from a partnership or is forced to dissolve a partnership because of the death or incapacitation of the partner, a notice of withdrawal must be filed to document the activity.
In the finance sense, a notice of withdrawal is a form submitted to a bank or other financial institution which holds deposits on account to indicate that money will be withdrawn from an account. For certain types of accounts, advance notice is required to make withdrawals. For others, people can make an on demand withdrawal with the use of a withdrawal slip which is submitted to a teller, who verifies that the funds are present and then honors the request.
One example of an account for which a notice of withdrawal must be used is a time deposit account. Time deposit accounts, of which certificates of deposit (CDs) are probably the most notable example, are interest bearing accounts which are held for a certain length of time. If someone wants to remove money, notice must be filed, and if the money is withdrawn before the account is matured, the customer may be required to pay a penalty fee.
When a customer opens an account for which a notice of withdrawal is required, this will be discussed in the paperwork which accompanies the account opening. The financial institution should disclose whether or not it is needed and how much advance notice is required. In addition, if people could incur fees by making withdrawals, this must be disclosed in the paperwork associated with the account as well.
It is important to be familiar with the terms which accompany a bank account to avoid confusion or problems in the future. For example, if someone files a notice of withdrawal on a certificate of deposit without realizing that the account hasn't matured yet, it might be honored by a bank staffer who assumes that the customer knows fees will be incurred, which could result in an unpleasant surprise. By being aware of the terms of the account, customers can avoid situations in which they incur fees or other penalties unexpectedly.
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