---
title: "Interest-Bearing Deposits: definition, formula, and thresholds"
description: "Interest-bearing deposits are all deposits on which a bank pays interest: savings, money market, NOW, and time accounts. They are the costed portion of the funding base, the complement to noninterest-bearing demand deposits."
canonical_url: https://www.bankregreports.com/glossary/interest-bearing-deposits/
source: BankRegReports
category: "Liquidity & Balance Sheet"
units: "$"
schedule: "Schedule RC-E"
---

# Interest-Bearing Deposits

> Interest-bearing deposits are all deposits on which a bank pays interest: savings, money market, NOW, and time accounts. They are the costed portion of the funding base, the complement to noninterest-bearing demand deposits.

## Formula

```
Interest-Bearing Deposits = Total Deposits - Noninterest-Bearing (Demand) Deposits
```

Schedule RC-E splits deposits into noninterest-bearing and interest-bearing. Dividing total interest expense on deposits by average interest-bearing deposits approximates the rate paid on this funding.

## Why it matters

The interest-bearing share of deposits, and the rate paid on it, drive a bank's cost of funds. A bank whose funding skews heavily interest-bearing (especially toward CDs) sees its margin squeezed faster when rates rise than a peer rich in free checking.

## How to read it

Read interest-bearing deposits as a share of total and against the rate paid. A rising interest-bearing share (a mix shift out of free checking) or a rising rate both push the cost of funds up and compress net interest margin.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| Low share, low rate | Strong | Funding tilted to free checking; cheap overall cost. |
| Balanced | Adequate | Typical mix of interest- and noninterest-bearing. |
| High share rising | Watch | Mix shifting toward costed deposits. |
| Dominant, high-rate | Concern | Costly funding base squeezing the margin. |


## Worked example

A bank with $2 billion of deposits, $600 million of it noninterest-bearing, carries $1.4 billion of interest-bearing deposits, 70% of the base. If it pays 2.5% on that, the math flows straight into a higher cost of funds than a checking-heavy peer.

## Questions

### What is the difference between interest-bearing and noninterest-bearing deposits?

Interest-bearing deposits pay the customer interest (savings, money market, NOW, CDs); noninterest-bearing deposits (chiefly business checking) pay nothing. A larger noninterest-bearing share means cheaper funding.

### Why does the interest-bearing share matter when rates rise?

Interest-bearing balances reprice upward as rates climb, lifting funding costs. Noninterest-bearing deposits cost nothing regardless of rates, so a bank with more of them is insulated from rising-rate margin pressure.

## Sources

- [FFIEC Call Report Schedule RC-E (Deposit Liabilities)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)

## Related metrics

- [Noninterest-Bearing Deposits](https://www.bankregreports.com/glossary/demand-deposits/): Noninterest-bearing deposits, primarily demand deposit accounts (checking), are balances on which a bank pays no interest. They are the cheapest, stickiest funding a bank can have and a key driver of net interest margin.
- [Total Deposits](https://www.bankregreports.com/glossary/total-deposits/): Total deposits is the sum of all money customers have placed with a bank (checking, savings, money market, and time deposits) across domestic and foreign offices. It is a bank's primary and cheapest source of funding.
- [Cost of Funds](https://www.bankregreports.com/glossary/cost-of-funds/): Cost of funds is the interest rate a bank pays, on average, for the money it lends and invests: annualized interest expense divided by average funding from deposits and borrowings. It is the bank's own cost of money and the expense side of net interest margin.
- [Time Deposits (CDs)](https://www.bankregreports.com/glossary/time-deposits/): Time deposits are certificates of deposit (CDs) with a fixed maturity and rate. Smaller, retail CDs are reasonably stable; large 'jumbo' CDs above the insurance limit are more rate-sensitive and treated as a less reliable funding source.

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