CHAPTER XXVII

SAVINGS BANKS

242. Checking and Savings Accounts. Most banks receive deposits under two classes of accounts, checking accounts and savings accounts.

Money deposited in checking accounts can be drawn out by checks payable to the depositor or to any other party. These checks are payable on presentation at the bank. The cash on deposit usually does not bear interest.

Money deposited in a savings account cannot be drawn out by a check payable to any person other than the depositor himself. The law usually provides that the bank may require notice of from 10 to 60 days before paying money from a savings account. Banks rarely take advantage of this privilege, however. The cash on deposit bears interest at some rate fixed by the bank. 3%, 3%, and 4% are common rates.

243. Computing Interest on Savings Accounts. There is no uniform procedure for computing interest on deposits in savings accounts, as each bank adopts its own rules. The following are the rules of a Chicago bank:

"On the first days of January and July in each year, interest shall accrue at the rate of three per cent per annum on all savings deposits then in the Bank, and which have remained on deposit for one month or more; but no interest shall be payable for periods less than a month (except as herein otherwise provided), nor upon sums less than one dollar, nor for any part of the half year included between the first days of January and July, or July and January, as the case may be, on sums withdrawn between those periods.

"Interest shall not be paid on average balances; and all withdrawals between the interest days shall be deducted from the first deposits.

"On deposits made during the first ten days of any calendar month, interest will be allowed from the first day of that month. On all deposits made after the first ten days of any calendar month, interest will be allowed from the first day of the succeeding month."

Problem. Following is a transcript of the pass book showing the savings account of W. M. Scott.

W. M. SCOTT....

.Book No. 35836

In Account with The Snowden Trust and Savings Bank of Chicago.

July 1, 1917. Since the $100.00 deposit was made during the first ten days

of January, it bears interest from the first of January.

Interest on $100.00 for 6 months

$1.50

January 1, 1918. The $50.00 deposit of July 10th bears interest from July

1st, making the balance as of that date $151.50.

Interest on $151.00 for 6 months

The September 8th deposit bears interest from September 1st.
Interest on $40.00 for 4 months.

2.26

.40

The December 15th deposit does not begin to bear interest until January 1st.
Total

$2.66

July 1, 1918. As all withdrawals are deducted from the first deposits, the $75.00 withdrawal at February 8th is deducted from the January 1st balance, reducing the balance as of that date to $179.16. Interest on $179.00 for 6 months

2.68

January 1, 1919. The $85.00 withdrawal on December 21st reduces the balance as of July 1st to $96.84.

July 1, 1919. The $125.00 withdrawal on May 19th reduces the balance
as of January 1st to $104.55.
Interest on $104.00 for 6 months
Interest on $50.00 for 5 months
Interest on $100.00 for 4 months
Total

January 1, 1920. The withdrawals during the six months' period total $630.64. These exhaust the $425.64 balance at July 1st, and also cause a deduction of $205.00 from the deposit of October 16th. $301.75 minus $205.00 equals $96.75. Since this deposit was made after the first ten days of October, it does not begin to draw interest until November 1st. Interest on $96.00 for 2 months

1.56

.62

1.00

$3.18

$0.48

The December 14th and December 26th deposits do not begin to bear interest until January 1.

It will be noted that the January 1st interest is entered in the pass book after January 7th. This may seem incorrect, but it is caused by the operation of the following rule of the bank:

"Interest will be credited on the books of the Bank on the first days of January and July, but will not be entered upon the depositor's pass book nor be subject to withdrawal until on or after the tenth day following such credit."

Written Work

1. Following is a statement of the deposits and withdrawals of J. O. Dorman in the First Trust and Savings Bank, which pays 4% interest according to the rules quoted above:

2. Following is a continuation of the pass book of W. M. Scott (see example). Compute interest credits and show balances.

No further deposits or withdrawals were made until July 10, 1922, when the entire balance was withdrawn.

244. Postal Savings Banks. The United States Government has provided a savings bank system operated in conjunction with the postal service, whereby savings may be deposited at interest with the security of the United States Government.

Deposits. Any person ten years of age or over may become a depositor. Sums less than $1.00 cannot be deposited. No person can deposit more than $100.00 in any one calendar month, or have a balance at any time of more than $500.00, exclusive of interest. Depositors receive a postal savings certificate for the amount of each deposit. Interest is allowed on these certificates at the rate of two per cent for each full year that the money remains on deposit, beginning with the first day of the month following the one in which it was deposited.

Withdrawals. Money may be withdrawn by surrendering to the officer where the deposit was made the savings certificates covering the desired amount.

Bonds. Under certain conditions a depositor may surrender certificates in amounts of $20.00 or any multiple of $20.00, up to and including $500.00 and receive in return government bonds bearing interest at 2% per year. These postal savings bonds may be held in addition to the $500.00 deposit allowed to one depositor.