A bank’s success is due to the success of the community it serves. A bank’s willingness to help may be in its own interests primarily, but, whatever the motive, this help benefits the customer just the same. And the services a bank can render are manifold.
First of all, a bank is the safest depository for money, for cash in the form of bills and currency. A bank’s safe-deposit vault is a larger and stronger place for cash than anything the ordinary individual can afford to maintain. This is protection against fire as well as against robbery, and how many times are bank burglaries successful as compared with those in private residences or offices? No doubt there still exist some people who keep money in stockings, old teapots, or tucked away in bureau drawers, but these people are running big risks which might be almost entirely eliminated if they would avail themselves of the facilities offered free of charge by banks.
When money is placed in a bank, the depositor is thereupon entitled to draw against his account by means of checks. Payment by check is of inestimable benefit to the depositor, for it does away with the expense and inconvenience of paying by cash, and avoids the risks of loss or theft which are always present when cash is carried on the person or kept in the house. A bank makes no charge for this service, and, further, a bank almost always allows a depositor interest on his checking account, the usual condition being that he keep a minimum balance-that is, not allow the amount of money he has on deposit to fall below a certain agreed amount.
A depositor may also call upon his bank to collect checks for him that are drawn on other banks, and usually no charge is made for this service, which is a real one. For instance, if John Doe presents a check at his bank in New York drawn to his order by Richard Roe on a Chicago bank, the New York bank will collect the money from the bank in Chicago and credit it to Mr. Doe’s account. This is another service of great convenience to the depositor, and, like many of the other services rendered by banks, has become so commonplace that it is taken pretty much for granted and its full worth not always appreciated. If a man has a sum of money he knows he will not need for several months, he can arrange with his bank to deposit the money there; the bank will give him an instrument known as a Certificate of Deposit and agree to pay him a certain percentage for the use of his money for the duration of the time fixed upon. This is a very simple method of making a short-term investment, and, although the rate of interest paid is customarily low, it is far better to keep money working all the time, even if the return is low, than to let it be idle.
It is easier for a man to obtain a loan at a bank if he has an account there than is the case otherwise. A bank usually considers itself under certain obligations to its depositors, not only in the matter of making loans, but so far as terms are concerned. If a man is a stranger, a bank naturally requires security for any loan it may make him-stocks, bonds, mortgages, or other tangible property. In the case of a depositor, however, the bank is familiar with his affairs, knows his financial standing, and very possibly will consider his note ample security. In times of financial stress the loaning function of a bank is of most value to a depositor, for at such times banks will not customarily accommodate any one other than their own depositors. And often a ready loan may mean the difference between bankruptcy and solvency.
Bank deposits are repayable upon demand. That is to say, a depositor may withdraw the full amount of his deposit whenever he desires, and he may do this either by means of a check to his own order or to the order of whomsoever he may desire. It naturally follows from this that any part of his account may also be withdrawn upon demand. In other words, he may draw against his account in any amount or amounts up to the total sum deposited, and unless the bank pays these sums it lays itself open to a suit for damages.
In the modern business world the emphasis is continually upon short cuts and simplification. The practice of sending receipted bills is growing in dis-favor, and here a checking account is very handy. A check sent in payment of a bill must be endorsed-that is, signed-on its back by the person or firm to whom it is made payable, so that when the check is returned from the bank it is itself a valid receipt. Further, the person who draws the check may make a note on its face of the item being paid, and when this is done the check is a complete record of the transaction.
Bond coupons may be deposited in your bank and the bank will collect them for you and place the proceeds to the credit of your account. Many banks sell steamship tickets these days; travelers’ checks may be obtained at banks: banks will give advice and help on the income tax; they will act as brokers for the purchase and sale of securities. Many banks have trust departments for the administration and handling of estates. In fine, their business is so varied that in one short article it is impossible to do more than sketch the vague outlines.
For our purpose, however, perhaps the most important business of a bank is the service it can render investors. It is the duty of a banker to keep informed on this subject, and his knowledge and experience are always at the disposal of his depositors. A bank will not only buy and sell securities for you, but it will obtain information about investments, about the standing and reliability of brokers and investment concerns, and about business concerns as well. If you live in Richmond and want to and out about a firm in Cleveland, your bank will write to a bank in Cleveland and obtain the information you want. Banks are conducted so as to render service, and a man is foolish who does not avail himself of its facilities. Never hesitate to appeal to your banker for help and advice on all matters pertaining to investments. Remember, that is the business of a bank.
Source: The Outlook, 11 Oct 1922