[Illustration: Illustrating cheque collections.]
To illustrate the connection between banks at distant points let us
suppose that B of Haverhill, Mass., who keeps his money on deposit in
the First National Bank of that city, sends a cheque to S of Waconia,
Wis., in payment of a bill. S deposits the cheque in the Farmers' Bank
of Waconia and receives immediate credit for it in his bank-book,
just the same as though the cheque were drawn upon the same or a
near-by bank. The Farmers' Bank deposits the cheque, with other
cheques, in, say, the First National Bank of Minneapolis, or it may
send the cheque to its correspondent in New York--say the Ninth
National--asking to be credited with the amount. For sake of
illustration, suppose that the cheque is deposited with the First
National of Minneapolis. Now, this bank has a correspondent in
Chicago--the Commercial National--and a correspondent in New York--the
National Bank of the Republic. If sent to the Commercial National,
this bank has a correspondent in Boston--the Eliot Bank, where the
cheque would be sent. Now, the First National of Haverhill has a
correspondent in Boston--the National Revere Bank. The Eliot Bank
would likely take this cheque to the Boston clearing-house as a charge
against the Revere Bank. The Revere Bank would deduct the amount from
the First National of Haverhill's deposit and send the paid cheque to
the Haverhill Bank, where at the close of the month it would be handed
to B, showing on the back the indorsement of S, and stamping
representing all the banks through whose hands it passed. If the
Farmers' Bank of Waconia had sent direct to its New York
correspondent, the Ninth National, this bank would have sent to its
Boston correspondent, the North National, and the cheque would have
been charged up through the clearing-house against the Revere Bank. If
the First National of Minneapolis had sent direct to its New York
correspondent, the National Bank of the Republic, this bank would have
sent to its Boston correspondent, the Shawmut National, etc. As a
rule, banks collect by whatever route seems most convenient or
advantageous. It is estimated that millions of dollars are lost to the
banks each year on account of the time consumed by cheques en route.