Define: Secured Account

What Secured Account Means in a Contract

A Secured Account is a specific type of deposit or bank account that a contract identifies as collateral for one or more obligations owed by an obligor to a secured party. Rather than pledging physical property such as real estate or equipment, the obligor pledges the funds or investment assets held within the account itself. The account becomes the security, and the secured party gains rights over it that are triggered if the obligor fails to meet its underlying payment or performance obligations.

This arrangement is common wherever a lender, landlord, supplier, or counterparty wants a liquid, easily accessible form of collateral rather than relying solely on a debtor's promise to pay. Because cash and cash equivalents held in an account are simpler to value and realize than many other asset classes, secured accounts are a favored mechanism for reducing credit risk in commercial dealings.

How Secured Account Is Defined or Measured

The definition of a Secured Account in a contract typically identifies the specific account by number, institution, and account holder, and it describes the obligations the account secures. Contracts often specify whether the security interest covers the entire balance, a minimum required balance, or only amounts above a certain threshold. Some agreements require the obligor to maintain a set minimum balance throughout the term, effectively creating a rolling form of collateral.

Measurement also depends on how control over the account is established. In many jurisdictions, a security interest in a deposit account is only enforceable against third parties if the secured party has.