CURRENT ACCOUNTS

Evening Post, Volume CX, Issue 71, 20 September 1930, Page 8

CURRENT ACCOUNTS

(To the Editor.)

Sir,—ln recent correspondence under the above heading concerning increased, bank charges and comparing unfavourably local banking conditions with those Nof the Old Country, much has been made of the fact that in England interest is allowed on current account balances. A study of English banking practice and close contact with the accounting of business houses operating there disclosed the following particulars, which may be of interest and help to make a true comparison:

At each balance period commission was charged on the turnover of current accounts. This charge varied from l-16th p.c. to 1-Sth p.c, and in some cases % p.c., according to the natiire of the account held. The usual commissions was an l-Bth p.c. Thus, if a customer issued a total of £500 in cheques over the halfyear, he was charged 12s 6d. By arrangement between bank and customer, a small rate of interest was allowed on credit balances, usually from 1 to 2 p.c. In such cases, however, a good credit balance was maintained or the accounts were of a profitable nature in that they yielded a good return to the banks in commission. Further, the daily total of cheques paid in on outside towns was noted, and three days' debit decimals on the amount was charged at balance times, the banks maintaining that the customers were having the benefit' of these cheques adding to their balance, on an average three days before they were clear. Thus a cheque for £1000' drawn on an outside town resulted in a' charge of 3000 decimals. .A correspondent, "Aspro," writing to "The. Post" on 15th instant, states: "Some English banks give their customers interest on their current account balance and keep the account free of charge." In fairness he should have added that this was done by special arrangement in a few cases where the customers kept a credit balance that fluctuated little over the half-year, and where probably only a few cheques for small amounts were presented for payment. Again it is probable that "Aspro" has become confused with the deposit accounts retained by English banks, which to many people would appear very nearly related to a current account. These deposit accounts were subject. to fourteen days' notice of withdrawal, a rule not stringently enforced, however, as occasional drawings were met on demand, and only iv the case of large amounts, or the, balance being withdrawn in a lump sum. was the rule observed. Interest allowed on these accounts was dependent on the bank rate, and usually amounted to 2 or 3 p.c ' . A true comparison of the methods of assessing charges would reveal that the small fixed charge for keeping accounts is more favourable to customers. "Aspro's" perspective has been somewhat clouded by the rosy vision that in some cases English banks allow interest on current accounts, and from the remarks in his letter there is no doubt that to Him "distance lends enchantment to the view."—l am, etc., : O. NEMESIS.