Thin Line Between Current And Savings Account

It is well known that competition has resulted in somewhat obscuring the line that should exist between current and savings accounts. The practice has sprung up of allowing interest on some current accounts that are considered specially valuable. Some of them would more properly be included in the savings department or in deposit receipts; and, vice versa, some savings accounts are to all intents current accounts, not properly entitled to interest.

Competition is gradually forcing the banks to permit their small savings bank customers to draw cheques on their balances, and to operate them exactly as if they were current accounts. In all probability this development has come to stay. The public, having once tasted the pleasure of having its money at interest and at the same time subject to operation by cheque, will not readily submit to losing it.

The actual working of the savings bank ledger is exactly the same as the current account ledger. The page of the savings bank ledger is ruled so as to contain several accounts, the accounts in it being much less active than those in the current account ledger. In addition to the subdivisions mentioned as contained in each column of the current account ledger, the savings ledger has another for interest.

Guarding Against False Signatures

As there are a large number of accounts, many of them operated only at long intervals, the signatures of the customers are not nearly so familiar to the ledger-keeper as are those of the current account ledger. Greater care and watchfulness have, therefore, to be exercised in guarding against forgery. Some banks make it a rule not to depend altogether on the signature card or book in identifying savings bank depositors desiring to withdraw money. Some distinguishing characteristic of the person or features, or some special information, such as the date of birth, is recorded along with the specimen signature, and when this is done a few questions usually establish a doubtful identity quite satisfactorily.

The savings bank ledger is balanced in the same manner as the deposit ledger. It is hardly necessary to balance it so frequently as the latter book.

How Interest Is Computed

The calculation of the interest on accounts which receive interest on the minimum monthly balance plan is simple. All that has to be done is to pick out the smallest balance shown at the close of any one day in the month, and to calculate the interest for one month on that. Sometimes a system is followed similar to that which prevails in the calculation of bond interest-to regard each month as one-twelfth of a year, regardless of the number of days it contains. Under this system, if the minimum shown by an account is $246.77, the interest at 3 per cent. for one month would be 1-12th of 3-100ths of $246.77, or 1/4 per cent. of $246.77, or 61 cents.

On some few of the accounts it may be that interest on the daily balance is to be allowed. The usual way in that case is to take each one of the changing balances and after reducing the whole to the basis of one day, as explained in regard to overdraft interest, to calculate interest on it for the one day. When the proper amount of interest due to each account has been reckoned, and checked by another officer, the entries are made.

The total amount of interest to be allowed on all the accounts is debited to interest paid account, and each account is credited with the respective amount due to it. The customers' names, with the interest credited to each one, are entered on the credit side of the cash book; the debit for interest paid appears in one amount on the debit side.