CREDIT-ACCOUNT CUSTOMERS
As by far the greater number of a bank’s customers keep their accounts
in credit, we will begin this chapter by considering what average
balance should entitle a person to have his account worked free of
charge. In London, a man who opens a small account with a bank, and
whose credit balance averages £100, will not be debited with any
commission at the end of the quarter or half-year when the companies
rule off their books, while in the suburbs an appreciably smaller
balance is accepted, and, occasionally, interest is allowed there upon
current-account balances, though one will have to press pretty hard
for it. Competition is now so keen between bank and bank that it is
sometimes possible to make very close terms.
In the country it is considered that an average balance of £50 upon a
small account pays expenses. However, the bank-manager, who is as human
as the gentleman who sells one a dog, seldom neglects to make a small
charge upon these accounts when he considers that their owners will
stand 10s. a year or so. Broadly speaking, you can please yourself
whether you pay it or not. This class of business, of course, is
absolutely safe; so the customer, if he cannot come to terms with the
manager, is able to take his account to the cheapest market, always
remembering that it is never wise to bank with a second-rate firm,
whatever advantages may be offered.
Though a man keep a balance of £10,000 to his credit, he will not
receive one penny in the shape of interest unless he ask for it,
and, even after having arranged a rate, it is advisable to check the
banker’s figures and ascertain that you are getting it, as, sometimes,
they are apt to err in his favour, through small debits that have been
deducted from the interest, and which, consequently, do not appear in
your pass-book.
The following illustration, perhaps, will show how matters stand:--
A keeps an average balance of £150
B ” ” ” ” £600
C ” ” ” ” £5,000
The banker, if B and C are easy-going men, whose financial experience
is small, will conduct their accounts on the same terms as he does
A’s. He will, that is to say, work each account free of charge. But
such treatment is evidently unfair, for if A’s account is worked free,
then assuming that those of B and C give but little more trouble, each
is entitled to some allowance upon his average balance. They should
certainly endeavour to obtain it.
If the manager be interviewed, he may endeavour to convince either
B or C, by a process of reasoning, which is more persuasive than
scientific, that money is so cheap that, really, a high rate is out of
the question. He will further explain that his directors, as a rule,
do not make an allowance upon creditor current accounts; but should
either just hint at removing his account, a rate will be instantly
allowed, for competition among the banks for a large credit account is
so active that the customer has only to be firm and fairly reasonable
in his demands. The manager, of course, will endeavour to pay as little
as possible. Of that we may be quite sure. The customer, on his side,
should try to obtain the maximum rate, which is 1½ per cent. below Bank
rate in London, and in the provinces the usual country rate.
Original sin, not being yet eradicated from our race, a bank-manager,
who is endowed with his full share, sometimes endeavours to persuade
a customer to transfer sums from his current account to deposit
receipt, but it is always prudent to remember that his advice is not
disinterested, and that he is acting “upon instructions.” Experience
proves that, after a little while, a customer becomes tired of
continually transferring sums from his running account to deposit, and
then, when his account is getting low, paying the deposit-receipts to
his credit. Finding the process a weariness to the flesh, he often
ends by giving it up in disgust, when once again the wily banker is a
gainer at his expense. By obtaining a rate of interest upon his daily
current-account balances the customer is spared this trouble; and, if
he fail to induce his banker to grant it, then when his account is
in credit beyond a certain agreed sum, he should take care to get a
deposit-receipt.
Bankers, like individuals, are the slaves of their environment, and
in the Midlands and elsewhere, where it is usual to allow a rate on
the daily balances, commission is also charged on the turn-over or
sums debited. Interest upon the daily creditor balances is allowed at,
say, 1½ per cent. below bank rate, and a commission of ⅛ per cent. is
charged on the cheques a customer draws. The lower the rate of interest
and the higher the commission rate, the more profitable, of course, is
the account to the banker. The customer, therefore, when checking his
banker’s charges and allowances, will take care that he is receiving
the maximum rate of interest, and paying the minimum or lowest
commission rate, which varies from ⅛ to ¹/₁₆ per cent., while it is
sometimes possible to arrange for a reduced and merely nominal charge.
A person, when he sees a “little interest” credited in his pass-book,
is disposed to increase his balance, on the assumption that he is being
allowed a rate; but before doing so he should certainly ascertain what
the rate will be, for, upon examination, this allowance is occasionally
found to appeal more strongly to one’s senses than to one’s critical
acumen.
Having disposed of the paying average credit balances we can now
discuss those accounts that have a large turn-over. A trader, for
instance, who draws a considerable number of cheques during the course
of a half-year, and whose balance is small, cannot expect his banker
to work his account free of charge; but it is difficult to draw up a
table showing what he ought to pay, for the simple reason that some
bank-managers debit him with a rate which they think he will stand. A
¹/₁₆ per cent. commission, that is to say, 1s. 3d. upon each £100 he
draws out by cheque, seems a very full rate; and as there is a good
market for this class of account he should not disburse one penny more.
The owner, who always has a balance on the right side, can, if he find
his banker unreasonable, easily negotiate with his rivals, who are
delighted to see fresh faces. Indeed, it is quite possible that he may
succeed in getting his account worked free, or for a nominal fee of
half a guinea or so, if the turn-over is not very large.
It is now time, perhaps, to give a brief sketch of the manner in which
a manager charges his ledgers at the end of the quarter or half-year.
As a rule he and the accountant go through the books together; and
as there is no recognized scale by which the charges are regulated
it follows that they consider the man as well as the nature of his
account. The business of the manager is to make his branch pay;
therefore, if you do not criticize your commission rate, you may rest
assured that he will succeed brilliantly at your expense. Should he
think that the customer lacks experience, and is not acquainted with
the fact that competition between bank and bank for creditor accounts
is active, then he charges him ⅛ per cent. When, on the other hand, he
is aware that the client checks his expenses, caution is exercised;
and if the manager decide to claim commission the sum debited will be
extremely small.
After all, in the ordinary affairs of life one does not accept without
question the price of the seller; and if a customer be so unwise as
to think that a bank-manager has a higher sense of honour than his
kind, then he must be prepared to take the natural consequences. For
instance, D and E keep an average balance of £100 in their bankers’
hands, and the turn-over of each account is about £1,500 for the
half-year. The manager, knowing that D is not critical, charges him
¹/₁₆ per cent. commission, or 18s. 9d. E, he asserts, is a most
unpleasant man, who, when charged upon a previous occasion, threatened
to remove his account unless the sum were given back to him; E,
therefore, who is aware that competition is one of the factors that
determine price, has his business done free.
A large trader or merchant, as a rule, does not allow his banker to
have the use of a considerable amount of money free of interest;
and those accounts that are from, say, £1,000 to £10,000 in credit,
usually belong to women, who are not accustomed to the management of
money. The manager, anxious to stand well with his directors, some
of whom increase his salary if he add to the profits of his branch,
does not, of course, suggest to these ladies the advisability of
receiving interest upon at least a portion of their balances, but, on
the contrary, being wise in his generation, endeavours, by resorting
to those social amenities that raise him higher and higher in their
estimation, to hide the awkward word from their view, while laughing in
his sleeve at their excessive credulity.
The customer who keeps his account in credit should ask his banker:
“What average balance must I maintain in order that your people will
work my account free?” That sum ascertained, he can act upon the advice
contained in this chapter.