Having a banking account is a ;reat convenience in several ways. (1) It provides an easy means of placing cash that is not needed for current expenses into a safe place. (2) It makes it simple to deal with any cheques received, as thes0 can be paid straight into the account instead of having to be cashed through a third party. (3) It enables payments to be made without transfer of any actual cash; which is especially useful when payment has to be through the post; since, if the precautions (referred to below) are taken, a cheque can be rendered quite valueless except to the person in whose favour it is drawn. (4) A bank ma on occasion be very useful as a reference. (5) It makes it much easier to replenish an exhausted supply of cash when one is far from home. (6) The bank at which one has an account will take care of securities, plate, and other valuables in its strong-room. (7) The bank will give advice in respect to investments, and, if requested, make them for its clients.
How to open an Account. – The first step is to interview the manager of the local branch of the bank selected. He will take particulars of name, address, etc., and require specimens of your signature.
The account is opened by paying in cash or any cheques made payable to you by other persons. You will receive: (1) a cheque-book, the stamps in which will be charged against your account; (2) a paying-in book; (3) a pass-book, unless the bank has adopted the SEstem of sending monthly statements, got out with the aid of special machines; in which case these will serve the same purpose.
The Cheque-book. – The cheques in a cheque-book may be crossed or un-crossed, and either To Order or To Bearer. Most people should select uncrossed cheques To Order, as an un-crossed cheque can be converted into a crossed one by two strokes of the pen; and a To Bearer cheque, unless altered to To Order, can be cashed by anyone who gets hold of it.
Most banks now issue cheque-books of different sizes. For ordinary household purposes, and for carrying about with one, the cheque-book, measuring about 3 by 7 inches, will be found very convenient.
The cheque-book should be kept in a safe place so that it may not get into the wrong hands.
Iioio to draw a Cheque. – First, fill in the stub or counterfoil, which remains in the book when the cheque is torn out. It should bear the date of drawing the cheque; the name of the payee (the person in whose favour the cheque is drawn); details of what the cheque is paying for; and, at the bottom, in figures, the amount for which the cheque is drawn. Thus: 24 September, 1932, Jones & Co. 1 ton Anthracite, £3 10 0.
The facts thus briefly stated may be usi-f ul at some future time. Each counterfoil, it may be noted, bears the same number on the corresponding cheque. This helps the drawer to identify any cheque which he may wish to stop the payment of after drawing it, or to . trace a cheque that goes astray.
Second, fill in the cheque with: date (in top right hand corner); the name of parallel fines across it and writing & Co. thus: since it is good only if paid into the account of the person to whom it is drawn, in the payee, after the word Pay ; the amount (in words) for which the cheque is drawn ; in figures the amount for which the cheque is drawn (in bottom left-hand corner); your signature (in bottom right-hand corner). The drawing of the cheque is then complete. But as it may not have been carried out in the best possible way, a few cautions may be added. (1) Give individuals their Christian names or the initials of them, where known. A cheque drawn to Mr. Jones might be endorsed by any man named Jones. If a cheque is drawn to a married woman, her own initials, not those oi her husband, should be given. (2) The amount in words, should begin right up against Pay , and that in figures against £ , to prevent any word or figure being interpolated in front; a four being converted into fifty-four, or 5 into 35, for example. (3) If the amount is for less than one pound, cross out the £ sign.
Protecting a Cheque. – The cheque is nominally valueless till it has been endorsed, that is, the payee has written his name on the back. In its present condition he can cash it over the counter of the drawers bank (of course, after endorsing it), or can give it to anyone else to cash for him.
If the person to whom a cheque is made payable is known to have no banking account, or needs immediate payment, the cheque may be left open, that is, unprotected in any way.
But if the cheque were dropped and picked up, or abstracted from a letter in the post, or otherwise got into wrong hands, there would be nothing to prevent the endorsement being forged and the cheque presented and cashed. The drawer of the cheque would have no security, and would lose the value of the cheque.
It is therefore customary to at least cross a cheque by drawing a pair of This prevents it being cashed over the counter. The cheque must be paid into somebodys banking account eventually, and this makes the tracing of it easier. At the same time, it does not prevent the payee from getting cash for it, if some other person, who has a banking account, is willing to oblige him. But the drawer is still unprotected should the cheque be fraudulently endorsed.
If, however, the cheque is crossed, and the words Not negotiable written across, thus: the protection is carried a stage further.
Suppose that a cheque drawn by X in favour of Mr. Jones, gets into the hands of Y, who, if the cheque is not already endorsed, endorses it in Mr. Joness name, and gets Mr. Z to cash it for him. Mr. Z pays it into his bank. If X or Mr. Jones is able to trace the cheque, he can demand the return of its value by Z, who, owing to the words Not negotiable having been written on it, has no more right to it than Y – that is, none at all.
This addition therefore makes it unlikely that the cheque will be passed unlawfully from hand to hand, though it does not prevent it being cashed for the payee by someone who has confidence in him.
A cheque is made absolutely useless to anyone but the payee if it is crossed lc Payee only, thus: which case he is credited with the amount of the cheque. Even if his endorsement had been forged, he would still be the only person who could benefit. This method of safeguarding is therefore strongly recommended when a cheque has to be posted and the payee is known, or may safely be assumed, to have a banking account.
In all cases, the possible fraudulent alteration of the amount for which a cheque is drawn can be provided against by writing across the cheque Under – £, giving the value in £ just above that of the cheque. Thus, a cheque for 17s. 6d. Would be crossed Under one Pound, one for £38 16s. Lid., Under thirty-nine Pounds, and so on.
Alterations made by the drawer should always be initialled by him. For instance, Mr. Z. Y. Robinson, after drawing a cheque for £47 10s. 0d., finds that the amount is correct in words, but £48 10s. Od. In figures. He should crose out the £48 10s. Od. Substitute £47 10s. Od., and write his signature against it. If a cheque printed To Order is changed to To Bearer, the full signature should also be written against the alteration.
Cheques to Self – Mr. E. T. Smith, requiring some ready money, draws a cheque with the word Self or Cash on the payee line. He leaves the cheque uncrossed, and endorses it. The cheque can then be cashed at his own bank by himself or his agent. Should he inadvertently have crossed it, he can open it again by writing Pay Cash, E. T. Smith across it.
Before a To Order cheque is paid into an account it must be endorsed on the back by the person to whom it is made payable. The payee should write his name exactly as given on the face of the cheque – except of course for any courtesy title – Mr. or Esq. If the drawer has written Mr. J. Nokes, the payee signs as J. Nokes rather than John Nokes, though the J. stands for John. If a woman receives a cheque in which her husbands initials, not her own, have been used, she should sign as follows: Marion Violet Caldcr, wife of A. J. Caldcr. The endorsement of a cheque drawn to Mr., Mrs., or Miss So-and-so, without initials, should include initials or full names. Thus Mr. Perkins would sign as H. Perkins, or Harry Perkins. If a mistake is made in the spelling of the payees name it should be repeated in the endorsement and the correct spelling written below, thus: Thomas Smyth Thomas Smythe Having been endorsed, the cheque, if not already crossed, should be crossed, and have the name of the bank into which it will be paid written across it; thus:
Dividend warrants are in effect cheques, but instead of being endorsed on the back they are signed on the front by the payee in a place designated for the purpose. The counterfoil attached to a warrant gives certain information and is a certificate of deduction of income tax. It should be preserved carefully, as it must be produced if repayment of the tax is claimed.
A paying-in book like a cheque-book, has pages made up of a fixed counterfoil and a detachable part, called in thia case a slip. Mr. A, being about to pay in various cheques, warrants, treasury notes, and cash, dates both counterfoil and slip at the top, and writes his name on the slip. He then lists the cheques and warrants on the counterfoil, giving suffi-cient detail – name of drawer, company, etc. – to be useful for reference. On tha slip he need enter values only. When he presents the book the cashier checks oil the entries against what he receives, and, if everything is correct, initials the counterfoil and tears out the slip.
The jiass-book should be handed in to the bank at intervals to be made up, that is, have entered in it all in-payments made by the client and all cheques drawn by him and presented since it was last brought up to date. After being made up it is returned, with all presented and cancelled cheques, on request.
The left-hand pages deal with inpayments, and merely give the total of what was paid in on any particular date after the laconic entry Sundries (sometimes shortened to S.) or Cash. In the case of dividends paid direct to the bank, however, details are given, so that the client may be able to keep track of them.
The right-hand pages are devoted to cheques drawn by the client and passed through the bank. The name of the payee is given in each case.
The pass-book shows how the client stood in relation to the bank at the date when it was last made up. He can check its correctness by ticking oft the items against the records of his chequebook and paying-in book counterfoils. Comparison may reveal that some of the cheques drawn had not yet been presented, in which case his actual position is worse by the total of these cheques.
Current and Deposit Accounts. – The account upon which cheques are drawn is called the current account; it can be increased or reduced at will. Should the balance be considerably larger than is likely to be needed, the customer may place part of it on deposit with the bank.
A deposit account has interest paid on it by the bank, the rate varying with what is called the bank rate, or advertised minimum discount rate charged by the Bank of England. Usually a deposit account is subject to seven days notice, which means that notice of transferring any part or all of it back to current account should be given seven days before the actual transfer is to be made.
Dividends Payable to Dank. – Many companies like to be authorized to pay dividends direct into the bank, as a con-siderable amount of stamp duty and trouble is saved thereby. The shareholders on their part are spared trouble of presenting warrants. If the authorization is given, counterfoils of warrants are placed with cancelled cheques in the pass-book before it is returned to the customer, so that he has definite proof of their having been received, and of income tax having been deducted.
Bonds to Dearer should be lodged with the bank, which will dotaeh coupons as they fall due for payment and credit the customer with the amount, less income tax. A voucher of deduction will be furnished by the bank on request.
The stubs of old cheque-books and paying-in books should be dated on the outside, the period covered being shown on each. They should also be numbered and arranged consecutively, as this will make it much easier to trace an entry.