When the account is straight, put the checks into your numerically arranged file of these. Strap to the pile (or such part of it as is to be kept at hand) the slip giving data of the unreturned checks. When the next statement comes, if any of these checks are still out, you will not need to look back to find out why the bank balance is larger by that amount. It is not often necessary to refer to returned checks. Tie them (still in numerical order) into packages by years, with the year plainly marked on top. If you have plenty of storage space you may like to keep them for years, but they are valueless after a certain time, that time depending on the legal limit of the state for the collection of debts. Say this is 7 years. Then when you add the 1922 checks to the file, you can safely throw away those for 1915.
This mechanical check on stored matter saves time as well as storage space, since the file never needs to be looked over.
The method described is the simplest one, sufficient for the average family. The better way from the legal point of view is to paste each returned check to its stub, and to keep the whole book. The stub has a repetition of the check items, and both are original records. Having such a record in duplicate is better evidence than half of it alone. The legal limitation as to collection of debts does not apply to a suit on the ground of fraud, but fortunately few families are subjected to such suits.
If the simpler form is followed, the check-book stubs should be kept only if they offer any information not on the Accounts cards. Otherwise they can be thrown away after a brief period, say those from one check-book when the next has been completely filled, so that its stubs are ready for filing.
Exchange is often charged by banks for cashing checks on out-of-town banks, unless these are in one of the financial centers. In order to be sure that the out-of-town recipient will receive the full amount paid by the remitter, a bank draft may be used. This is the bank's own check, on which no exchange is charged, and which any bank will sell to a depositor. Drafts on foreign countries, at the current rate of exchange, are also obtainable through the bank and are often the most economical way of sending money to another country.
A certified check is one that is taken to the bank cashier for certification before being paid out. The bank sets aside the sum represented, to be paid only on presentation of this particular check, so that there is no danger of its being returned to the person who asks for the money, marked "No funds." Transactions between strangers, if in large amounts, should be conducted by certified checks.
Overdraft is a frequent occurrence in banks. Some depositors, especially business men, may overdraw deliberately, knowing that funds will soon come in to set their accounts straight. If the depositor of a personal or household account overdraws, it is usually through inadvertence. The check-book shows a larger balance than the bank ledger, because the depositor has made a mistake in addition or subtraction. The first time a customer overdraws, the bank takes no other step than to notify the depositor courteously and ask for immediate deposit to cover the deficit. If a depositor continues to overdraw, he or she is usually warned by the bank that no further overdraft will be allowed. This means that the next time a check is presented calling for a larger amount than the depositor's balance, it will not be honored. That is, it will not be cashed, but returned to the presenter marked "No funds" or "Insufficient funds." A check is "protested" when protest is entered before a notary public, in which case the drawer must pay the notary's fee. A depositor who overdraws has poor credit with a bank, and this affects his or her credit everywhere.
Endorsing a check means receipting for it. The person to whom it is drawn lays the check on the desk or table, turns it toward him face down, and writes his or her name across the back of the check, near the left hand end. Writing the name elsewhere increases the work of the bank. The name must be written as it appears on the face of the check, and where there is any inaccuracy except the omission of an initial, the name should be written accurately underneath. To use the example given before, M. L. Anderson or Mary Anderson needs no further comment, but if the other mistakes are made, the endorsement should read
Mary L. Andersen (Mary L. Anderson)
Marie Anderson (Mary L. Anderson)
When the person to whom the check is made wishes to deposit it to his bank account, he endorses
Pay to Blank National Bank or order John M. Jones
If he wishes to pay it to some person or firm for goods received, he should endorse to that firm:
Black, Green and Brown or order John M. Jones
If the words "or order" (or "to the order of," which form is also used) are not added, the endorsement is restrictive, and strictly speaking the payee can obtain the money only at the bank on which the check is drawn. Although banks are not strict in exacting this, the proper form should be used as a matter of good business habit. The receiver must write his own signature as the receipt for the check. If the check is endorsed at first only with Jones's name, he may have no proof that he paid it to Black, Green and Brown.
Checks drawn to "Bearer" are the same as cash, as they are cashed on any one's endorsement. They are rarely advisable, except when one wishes to procure cash in return for one.
Joint Account. This means an account on which two or more people, usually husband and wife or business partners, have an equal right to draw. The account is opened by both together and either signature is enough on a check. Many recommend this type of account for the family, husband and wife drawing equally against it. If a minimum deposit is required, there is a money saving in having only one account, but from every other point of view this is a poor method. It is much more difficult to keep the record of the account straight when two people are using it. There is a general belief that there is an advantage in a joint account in case of the death of one of the parties to it, on the ground that the money is still available to the other. This belief is founded on tradition, not on present day fact. In all but a very few of the states on the death of one of the parties to a joint account the whole deposit is considered the property of the deceased, and the survivor cannot draw against it. Usually permission can be obtained from the proper state official for the survivor to use the account, but inheritance tax must be paid on the whole sum. If the amount is divided equally in two accounts under the two names, the survivor not only has the money in his or her account available as usual, but loses only half as much by payment of inheritance tax.
Trust Accounts have the same disadvantages as joint accounts, and are therefore not advised.
Safety deposit departments are maintained by many banks, where for a few dollars a year a box can be rented that is as near perfect security as anything earthly can be, where family papers of importance, insurance policies, bonds and the like can be kept. A small amount of jewelry can be stored in such a box, and there are larger ones to be rented for more jewelry, silver and other valuables. The box is accessible to the authorized person or persons at any time during banking hours, and its use may save serious loss. It should be noted that there is the same disadvantage in holding a safety deposit box jointly that there is with the joint bank account. On the death of any person who has the right to open the box, the whole contents of the box are considered the property of the deceased, and sealed by the proper official. The survivor must prove title to any of the contents of the box that he claims.
After the initial visit to open a checking bank account, it is not necessary to go in person to a bank to continue as a depositor there. All the business can be conducted by mail, checks being deposited by letter, cash by registered letter, and the checks drawn to Self or Bearer being cashed at some office or store where one is known. It is therefore not necessary to change banks when one moves to some distance. But there is a great advantage in being personally known to the bank officials, since personal acquaintance always makes cooperation easier. And although any bank officer will give advice as to investments to any depositor, it is only human that he should take a little more trouble for one with whom he has a pleasant acquaintance. As is pointed out in the next chapter, bankers are excellent advisers as to safe investments. They tend to be conservative, which is very helpful to most would-be investors. And every depositor has a right to ask his own bank for help.