What is a Demand Deposit Account (DDA)?

A Demand Deposit Account (DDA) is specifically designed as a transactional account that allows account holders to deposit and withdraw funds on demand without any restrictions on the number of transactions. This type of account is typically used for everyday banking activities, such as making payments, receiving deposits, and accessing funds easily.

In the context of the correct choice, a DDA serves as a merchant bank account that can be utilized by both acquirers—entities that process credit and debit card transactions on behalf of merchants—and consumers, facilitating seamless financial transactions. This feature emphasizes the account's primary function, which is to provide liquidity and ease of access for payments.

This understanding highlights why the characteristics of a DDA align perfectly with the mentioned scenario of a merchant bank account, distinguishing it from the other types of accounts listed, such as investment accounts, savings accounts with limits, and loan accounts that have fixed repayment terms.