Customers have various motives in making deposits of cash funds. One motive is the desire for safety. The depositor gives up his right to any particular cash when he makes a deposit; he cannot properly say he has "money in the bank"; he has simply the right to draw money from the bank, and it is very unlikely that he would get back the identical cash which he actually deposited. If the depositor thinks in terms of the extraordinary facilities which the bank has for the safe-keeping of its moneys and valuables, he is quite likely to err as to the exact nature of deposits. He may make a "special deposit," having the banker "earmark" it and keep it out of the general fund of the bank's cash, so that the identical money deposited can be repaid; but this would be rather a warehouse business than commercial banking, and deposits are not of this nature. The safe-keeping, therefore, when rightly understood, refers, not to the depositor's funds, but to the bank's funds. The depositor's funds are safe only in the sense that a claim against the bank is good and the facilities for safe-keeping (vaults, guards, burglar alarms, etc.) of the bank's funds add to the value of a depositor's claims.
Another motive for depositing cash funds with a bank is convenience. Payment by check is more convenient than payment by money. The use of checks saves the bother and expense of counting and of shipment; checks are relatively safe against theft and loss in transit; they are payable only to the payee or indorsee; the voucher becomes a receipt; and large sums may be paid with the same ease as small ones.
A third motive may be the receipt of interest on the deposits. In communities where the competition for accounts is intense, banks offer interest on the average balance carried by the depositor; this is especially likely in the case of large accounts, as of the governmental units, corporations, or other banks. The interest paid ranges from 2 to 4 per cent, varying with the account and the bank. The policy of the bank may be open, explicit, and the same to all, or arrangements with the depositor may be secret. Paying interest on deposits is discouraged by bankers, for it adds to the expenses, forces the bank to negotiate loans which have high earning capacity but inadequate security, and at times, when deposits are increasing faster than loans or when the market money rates are low, eats up the bank's profits. If interest is paid, it should be done sparingly and on a sliding scale of rates which varies with the market rate, and the burden should be on time deposits.
The bank performs many services for the depositor which, because of its large clientele and organization, it is better equipped to perform than the depositor himself. It collects his cash items and other papers through its clearing house, messengers, or transit and collection departments; it keeps and cares for his securities, and upon order will buy or sell these for him; it offers free advisory service about credits, market conditions, signatures, and so forth. The exact nature of these and other services which are tendered to the depositor who maintains with the bank a fair dependable balance, will appear in the following chapters.
A more important motive than any of these is bank "accommodation," as it is called. The depositor wishes to be assured that he will have someone from whom he can get loans in case of need, and a bank which has enjoyed the use of a good balance from a worthy customer assumes an implicit responsibility to accommodate that depositor with loans when appeal is made. In this sense the relations between customer and bank are mutual. In the depositor's daily business transactions, occasions frequently arise when he wishes to procure loans on his own note or by the discount of paper in his portfolio, and the bank stands ready to provide customers with its own credit in exchange for their credit or that of other persons. The bank offers a market for procuring and selling credits and so facilitates business in this incomparable way.