CHAPTER IV INSTRUMENTS OF TRANSFER OF CREDIT FUNDS EVERY purchase and sale involves an exchange in possession and ownership. Money funds when used in exchange are passed from hand to hand. Many forms of credit funds, however, do not allow of this method of transfer. For the purpose of making transfer of credit funds, several classes of instruments have come into vogue, each adapted to some special use or to the transfer of some special form of credit funds. er's check. The most common form of instrument used for the transfer of credit funds is the "customer's check." A $10,000 credit account is purchased at a bank The custom- by a customer for the purpose of making current purchases and payments. He then buys a stock of goods for $1,000. In exchange for the goods the customer of the bank transfers $1,000 of his credit account to the one from whom the goods were purchased. To do this he draws his check for the amount. Form and A " customer's check" is an order on a bank for the payment of money due on the "account" of the maker. It is payable on demand. It is in reality a significance sight draft on the bank. It differs from ordiof a "custom- nary commercial drafts in that the drawer usually has "credit funds" in the bank with which to meet it; the bank is therefore bound to honor the check when presented. The check need not be in any prescribed form; it may be written on a blank sheet of paper with a er's check." pencil or entered on the printed forms of a bank. It is for the sake of convenience and uniformity that banks provide blank checks for the customers. These blanks are usually bound and given out to the regular customers of the bank in book form. Each check usually has a 66 stub," or short end, which is left in this book after the check itself has been torn out, on which memoranda may be entered for the convenience of the customer-it assists him in keeping a record of the transfers made by him, and of the amount of such funds still to his account at the bank against which checks may be drawn. As before stated, no particular form is necessary, and a lead-pencil will serve as well as ink. The bona-fide intention of the one owning the fund or account is all that it is necessary for the bank to know. But certain rules should be followed as a matter of convenience to the bank and precaution to the drawer. In writing and signing checks good black ink should be used. How to make Date of check. Checks should be dated, but the absence of the date does not warrant a bank refusing to cash them. While a note executed on Sunday is not good in many jurisdictions, a check so dated is valid. A postdated check does not make the bank liable for payment if presented before the date entered. should never be issued under an arrangement with the holders that they will not present them till a subsequent Checks Such prac date, inserted on the face of the instrument. Such tise often leads to complications of business relations which wreck the credit of the maker and put the bank to endless trouble. Filling in the amount. In A check may be drawn for any amount, so long as it does not exceed the "credit fund" of the one drawing. the office of the Pacific Mills, Boston, may be seen the canceled check of the United States for one cent; on the walls of the Bank of Commerce, New York, is a check for $14,000,000, signed by the banking house of Kidder, Peabody & Co. In this арpears one of the great economies of the use of bank credit. It is just as easy to transfer $14,000,000 in form of credit funds at the bank as it is to transfer one cent. In writing in the amount, the drawer should begin at the extreme left of the line. The illustration here given is a copy of a check drawn by Andrew Jackson on the second Bank of the United States, for one dollar. It is an excellent example of a poorly written check, and one which could be very easily "raised." One receiving such a check might write "one hundred" before the word "one," and "10" before the figure "1," and in this way raise the check from $1 to $101. If this were done, and the bank cashed the check, the bank would not be responsible for the loss. The drawer would be held responsible for his own carelessness. This method of raising checks is the one most common in banking experience. It is wise to begin the writing at the lefthand margin, or draw a running line before as well as after the written words, thus preventing any additional writing. The check here exhibited, drawn by Daniel Webster on the Boston branch of the Bank of the United States, is a carefully drawn instrument. When checks are presented to banks for payment, in which the figures in the margin do not correspond with the amounts stated in the body of the checks, the courts have decided that the amount stated in writing shall be considered correct. The usual practise, however, is for the paying teller to withhold payment until he may satisfy himself as to the intention of the maker of the check. It is not necessary to enter the name of the one to whom the credit funds are to be transferred. If a check is drawn payee. Entering the "Pay to Bearer," any person that is the bearer name of the can collect it and no name need be inserted. The name of a definite payee may be inserted, as, for example, "Pay to Leonidas Smith." Usually, however, checks are drawn to some person "or order." The phrase "Pay to the order of Leonidas Smith" signifies that the amount is to be transferred or delivered to Leonidas Smith, or to any person to whom he orders it paid. It is customary to number checks consecutively in the check-book so that each one can be accounted for. The numbers are inserted for the convenience of the custom er, and not for the convenience of the bank. The checks (or "vouchers," as they are called after they have been paid) when returned may thus easily be compared with the "stubs" of the check-book, or pasted back into the book and filed for Checks should be numbered. easy reference. The 66 'check-book." A check-book is a bound collection of blank orders for the transfer of bank credit. The advantage of binding is that the "stubs" may be kept for reference. By reference to the memoranda so kept the customer may at any time know what amount of funds remain subject to draft. The "bank-book" or transcript of deposits shows the other side of the customer's accounts. At the end of each month this is left at the bank that the amounts drawn may be entered and a balance struck. If the bookkeeper's balance is different from the customer's, this may be accounted for by checks drawn but not presented for payment. There being no mistake, the bookkeeper's balance, less checks outstanding, will equal the balance appearing on the stubs of the check-book. The unpaid checks may be presented at any time; therefore the available balance of account is the amount shown by the "check-book." After the "bank-book" has been balanced, the paid checks are returned as "vouchers." If one wishes to draw money on his own account the check should be written "Pay to the order of Cash." This Drawing is preferable to a check drawn to "Bearer." A check to check drawn to "Cash" will not be paid to oneself. any one but the drawer or his well-known representative, while a check payable to bearer, if lost, might be misused. A check written "Pay to the order of....[your own name] ...,' " will necessitate an indorsement--i. e., one drawing to himself would be required to indorse his own check before he could get it cashed. One wishing to draw a check to pay a note may make it payable "To the order of Bills Payable." A payment |