Final answer:
A bank confirmation letter is a document that requests verification of the amounts on deposit at a financial institution, particularly in relation to demand deposits, which are funds in a bank that can be withdrawn or used anytime.
Step-by-step explanation:
A bank confirmation letter is a form that requests confirmation of amounts on deposit at financial institutions. This letter serves as a proof of demand deposit, which is a checkable deposit in banks that is available by making a cash withdrawal or writing a check.
Demand deposits are essential to individuals because they hold money for the purpose of buying things and require liquidity, which is provided by the bank without delay or penalties. Similarly, a debit card operates like a check and offers an instruction to the bank to transfer money directly from the account holder's bank account to the seller. In contrast to demand deposits, a Certificate of Deposit (CD) allows depositors to save money with the stipulation that the funds remain in the bank for a set period of time in exchange for a higher interest rate, but typically includes a penalty for early withdrawal.