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drafts.
VI. BANK DRAFTS
A draft is a formal demand for the payment of money. Your bank
cheque is your sight draft on your bank. It is not so stated, but it is so
understood. A cheque differs from an ordinary commercial draft, both
in its wording and in its purpose. The bank is obliged to pay your
cheque if it holds funds of yours sufficient to meet it, while the person
upon whom your draft is drawn may or may not honour it at his
pleasure. A cheque is used for paying money to a creditor, while a draft
is used as a means of collecting money from a debtor.
Nearly all large banks keep money on deposit with one or more of the
banks located in the great commercial centres. They call these
centrally located banks their correspondents. The larger banks have
correspondents in New York, Chicago, Boston, and other large cities.
As business men keep money on deposit with banks to meet their
cheques, so banks keep money on deposit with other banks to meet their
drafts.
A BANK DRAFT is simply the bank's cheque, drawn upon its deposit
with some other bank. Banks sell these cheques to their customers, and
merchants make large use of them in paying bills in distant cities.
These drafts, or CASHIERS' CHEQUES, as they are sometimes called,
pass as cash anywhere within a reasonable distance of the money
centre upon which they are drawn. Bankers' drafts on New York would,
under ordinary financial conditions, be considered cash anywhere in
the United States. A draft on a foreign bank is usually called a BILL
OF EXCHANGE.
[Illustration: A cheque for the purchase of a draft.]
Cheques have come to be quite generally used for the payment of bills
even at long distances. If a business man desires to close an important

contract requiring cash in advance he sends a bank draft, if at a
distance, or a certified cheque, if in the same city. If he desires simply
to pay a debt he sends his own personal cheque. Bank drafts are quite
generally used by merchants in the West to pay bills in the East. A draft
on New York bought in San Francisco is cash when it reaches New
York, while a San Francisco cheque is not cash until it returns and is
cashed by the bank upon which it is drawn. In the ordinary course of
business cheques are considered cash no matter upon what bank drawn.
The bank receiving them on deposit gives the depositor credit at once,
even though it may take a week before the value represented by the
cheque is in the possession of the bank.
[Illustration: A bank draft.]
All wholesale transactions and a large proportion of retail transactions
are completed by the passing of instruments of credit--notes, cheques,
drafts, etc.; a part only of the retail trade is conducted by actual
currency-bills and "change." Banks handle the bulk of these
transferable titles and deal to a very small extent--that is,
proportionally--in actual money. The notes, drafts, bills of exchange,
and bank cheques are representative of the property passing by title in
money from the producers to the consumers. A small
proportion--perhaps six or eight per cent.--of these transactions is
conducted by the use of actual bank or legal-tender notes. This trade in
instruments of credit amounts in the United States to fifty billions of
dollars yearly.
VII. PROMISSORY NOTES
[Illustration: Ordinary form of promissory note.]
A PROMISSORY NOTE is a written promise to pay a specified sum of
money. At the time of the note's issue--that is, when signed and
delivered--two parties are connected with it, the maker and the payee.
The maker is the person who signs or promises to pay the note; the
payee is the person to whom or to whose order the note is made
payable. NEGOTIABLE in a commercial sense means transferable, and
a negotiable note is a note which can be transferred from one person to

another. A note to be made negotiable must contain the word bearer or
the word order--that is, it must be payable either to bearer, or to the
order of the payee. A NON-NEGOTIABLE note is payable to a
particular person only. A note may be written on any kind of paper, in
ink or pencil. It is wise, however, to use ink to prevent changes. All
stationers sell blank forms for notes which are easily filled in.
The samples of notes which appear in this lesson are selected simply to
illustrate to students the fact that there are a great many special forms
of notes in common use. The wording differs slightly in different States.
The DATE of a note is a matter of the first importance. Some bankers
and business men consider it