Everybodys Guide to Money Matters | Page 9

be quite the exception if she does not, in all things, find him a
safe and prudent counsellor.
As a rule, no charge is made by a bank for keeping an account,
provided the balance, that is, the amount of money they hold for the
customer - technically the credit balance - is not persistently small. If it
were always under £50 that would be considered small, but if only
occasionally below that figure, and sometimes above £200 for any time,
it would generally be exempt from charge. When a charge is made for
keeping an account which is not remunerative or free from trouble, it
does not amount to much, and is fairly earned.
If an advance of money is required for a temporary purpose, the bank
will often lend the money by allowing the account to be overdrawn,
that is, the balance in the pass-book will appear as due to the bank
instead of from the bank for the sum required from time to time. This is
sometimes convenient when the advance is only required for a short
time as avoiding the necessity for disturbing any investment which
otherwise would have to be sold. As a rule, however (though exceptions
are made where the customer is absolutely to be depended upon), the
bank would desire some security to be deposited. This may take the

form of a sufficient portion in value of stocks or shares in which the
customer has invested, or sometimes the personal guarantee of one or
two responsible persons is accepted. This is quite regular business, and
the interest usually charged is fair and reasonable.
CHAPTER III.
LONDON BANKS AND BANKING.
THE private banks now doing business in London are few in number.
The tendency of late years has been to transform these banks into
"Limited Liability" Companies, or to amalgamate with companies of
this character. It looks as though, in course of time, private banks will
altogether cease to exist, the joint-stock banks being better adapted to
modern requirements. The private banks do not invite deposit, and
interest on accounts is not allowed. They look to the average balance on
each account to compensate for the trouble and expense of keeping it,
with a considerable margin for profit. They require that not less than a
certain fixed sum shall be the minimum balance of a customer's
account, but, of course, the larger the balance the better for the banker.
The balance in some cases may be very large where the bank has a
wealthy connection, it being a boast with some rich persons that they
have never less than £10,000, or even £20,000 at their bankers. The
money so left in the banker's hands is lent out, or invested in various
ways, and all that he receives in the shape of interest, after paying the
expenses of his establishment, is clear profit. In short, the £500 a year
which the customer might obtain if he invested the £20,000 he leaves at
the bank, goes to the banker.
At the head of the joint-stock banks of London is the Bank of England,
which, like the private banks, do not take deposits upon which interest
is allowed, but rely upon the cash at their disposal in their customers'
accounts for their profits. In all other respects their mode of transacting
business is much the same as that of other joint-stock banks. Accounts
may be opened by merchants and traders, and by private individuals of
known respectability, and no particular sum is required to be lodged

upon opening the account. Formerly cheques were not allowed to be
drawn for a less sum than £10, but now there is no restriction as to the
amount. The profits of the bank are chiefly made by discounting bills
of exchange, which is done to an enormous extent. A bill of exchange
is an instrument by which a party who is owed money by another party,
and accords to him the benefit of delay in payment, for a fixed period,
draws on him in a form of order to that effect.
For instance, the firm of Bullion & Co. have sold to John Robinson
certain goods, which need not be specified, as the principle applies in
all cases, whether it be bankers, merchants, or traders, and for all
transactions where one party is indebted to another. The form drawn by
Bullion & Co. on John Robinson, which requires to be stamped
according to the amount, would be as follows:
--------------------------------------------------------| Due 1st Nov. | |
------------ | | £500 London, 29th Aug., 1987. | | | | THREE months after
date pay to our order the sum of | | Five Hundred Pounds for value
received. | | | | To Mr. John Robinson, Bullion & Co. | | Merchant, | |
Liverpool.