This section is from the "Practical Banking" book, by Albert S. Bolles.
This pass book has stamped upon it, both on the outside and inside, the same number which stands opposite the depositor's name in the signature book, and this number will hereafter be the key to all the dealings of Mr. Smith with the bank. It is written on the deposit ticket, it is written opposite the first entry in the books of the bank, it stands at the head of his ledger account, (page 164.) These consecutive numbers are printed wherever they possibly can be, to avoid mistakes, but as Smith will very probably forget the number of his book, especially if he is a careless person, and loses the book, it is necessary somewhere to be able to find him by name. Therefore, the signature clerk has one more duty to perform in connection with Smith's account. Lying opposite him is a pile of cards about one inch by three. On the top one of these, which contains Smith's number, the signature clerk writes very, plainly John Smith. This, as will be seen afterwards, serves as an entry in the alphabetical index.
When next Mr. Smith has any sum of money to deposit, he will make out and sign his deposit ticket as before, except that he now knows the number of his book, and will insert that in the proper place. Perhaps he will find several other customers awaiting their turn at the receiving teller's window. In this case, he must fall in at the end of the line in proper order. But Smith will not go on depositing forever. His deposit of savings has only half performed its mission while it is lying in bank. Ultimately it is to be used. When Smith has become sufficient of a capitalist to invest his money at his own discretion, then he will wish to withdraw his accumulations. But frequently before that time he wearies of well doing, or he miscalculates the amount which he can spare from his current expenditure, and it is necessary for him to withdraw a portion, or the whole; or this necessity may be caused by removal, by calamity, by sickness, or by death. In this case he finds his way to the paying teller's window, having first filled out a ticket of another form, the draft ticket. This he presents (see p. 164 for form), and again names the sum to be withdrawn. After proper scrutiny, which will be described under the paying teller's duties, his book is handed to him again, and between its leaves, instead of the draft ticket, is the money desired. If this exhausts his account, the form called a closing draft is used. In this case, the pass-book is surrendered, and is filed away according to its numerical order. But, if Mr. Smith continues his deposits for a sufficient length of time, he will be entitled to his share of the earnings. Any amount over $ 5, participates in the profits of the concern. It is considered that the use of any sum less than that does not more than pay for stationery and labor. Semiannually, a few days after the first of January, and a few days after the first of July, the book may be presented for the purpose of entering therein the dividends to which he is entitled, In the majority of cases, Smith takes it for granted that the calculation of this dividend is correct, though occasionally, he scrutinizes it very carefully.
The conditions of this dividend in many institutions, are these:— Deposits begin to participate in the dividend on the first day of each quarter, but they only are entitled to it if they remain till the end of the half year; thus, money which is in bank on the first day of January, provided it remains until the first day of July, receives a half year's dividend, but if withdrawn, even during June, receives nothing. If in bank on the first of April, and remaining until the first of July untouched, it draws a quarter's dividend. Furthermore, the first few days of each quarter, may be allowed to the depositor as a sort of grace, the limit being 10 days, at the half-year, and three days at the quarter.
The dividend is now usually spoken of as interest. As the rate in the State of New York is not promised in advance, but depends upon the profits of the half year, the term dividend, is considered more proper, but considering that it depends on the time, it is in that respect, strictly speaking, interest. The word interest-dividend would seem to be the most exact.
A few banks in New York allow interest to begin on the first day of each month, instead of the first day of each quarter, but with the same provision as to forfeiture in case of withdrawal before the end of the half year. In Pennsylvania, in some parts of New England, and in Great Britain, money bears interest for every full calendar month during which it has remained undisturbed, and is credited only once a year, unless the account is closed.
The current rate at present (1884) is wavering between four per cent, and three per cent. Ten years ago, the current rate for Savings deposits was six per cent., but the general investment rate has greatly lowered. Some banks make a distinction in rate for different amounts. For example, four per cent, on amounts not exceeding $1000, and three per cent, on any excess over $1000. Or on another plan, less than $500 receives four per cent., but if the whole deposit exceed $500, only three per cent, is paid on the whole. On this manifestly unjust plan, a depositor whose book has amounted to $501, receives absolutely less of the profits, than he whose aggregate is only $499. It would be better to preserve rigorously a limit as to the maximum which any depositor shall accumulate, or which he shall deposit in a given period, and then divide the profits pro rata, on all sums.
If interest is not withdrawn, it will itself draw interest as a deposit. The more ignorant depositors, however, frequently desire to draw their interest, even if they immediately redeposit it, forfeiting thereby a quarter's interest on it. Their intellect in money matters has not yet been sufficiently developed for them to grasp the idea that there can be an increase of money value, without a visible amount or representative having touched their hands.