As by far the greater number of a bank’s customers keep their accounts in credit, we will begin this chapter by considering what average balance should entitle a person to have his account worked free of charge. In London, a man who opens a small account with a bank, and whose credit balance averages £100, will not be debited with any commission at the end of the quarter or half-year when the companies rule off their books, while in the suburbs an appreciably smaller balance is accepted, and, occasionally, interest is allowed there upon current-account balances, though one will have to press pretty hard for it. Competition is now so keen between bank and bank that it is sometimes possible to make very close terms.

In the country it is considered that an average balance of £50 upon a small account pays expenses. However, the bank-manager, who is as human as the gentleman who sells one a dog, seldom neglects to make a small charge upon these accounts when he considers that their owners will stand 10s. a year or so. Broadly speaking, you can please yourself whether you pay it or not. This class of business, of course, is absolutely safe; so the customer, if he cannot come to terms with the manager, is able to take his account to the cheapest market, always remembering that it is never wise to bank with a second-rate firm, whatever advantages may be offered.

Though a man keep a balance of £10,000 to his credit, he will not receive one penny in the shape of interest unless he ask for it, and, even after having arranged a rate, it is advisable to check the banker’s figures and ascertain that you are getting it, as, sometimes, they are apt to err in his favour, through small debits that have been deducted from the interest, and which, consequently, do not appear in your pass-book.

The following illustration, perhaps, will show how matters stand:—

A keeps an average balance of £150
B keeps an average balance of £600
C keeps an average balance of £5,000

The banker, if B and C are easy-going men, whose financial experience is small, will conduct their accounts on the same terms as he does A’s. He will, that is to say, work each account free of charge. But such treatment is evidently unfair, for if A’s account is worked free, then assuming that those of B and C give but little more trouble, each is entitled to some allowance upon his average balance. They should certainly endeavour to obtain it.

If the manager be interviewed, he may endeavour to convince either B or C, by a process of reasoning, which is more persuasive than scientific, that money is so cheap that, really, a high rate is out of the question. He will further explain that his directors, as a rule, do not make an allowance upon creditor current accounts; but should either just hint at removing his account, a rate will be instantly allowed, for competition among the banks for a large credit account is so active that the customer has only to be firm and fairly reasonable in his demands. The manager, of course, will endeavour to pay as little as possible. Of that we may be quite sure. The customer, on his side, should try to obtain the maximum rate, which is 1½ per cent. below Bank rate in London, and in the provinces the usual country rate.

Original sin, not being yet eradicated from our race, a bank-manager, who is endowed with his full share, sometimes endeavours to persuade a customer to transfer sums from his current account to deposit receipt, but it is always prudent to remember that his advice is not disinterested, and that he is acting “upon instructions.” Experience proves that, after a little while, a customer becomes tired of continually transferring sums from his running account to deposit, and then, when his account is getting low, paying the deposit-receipts to his credit. Finding the process a weariness to the flesh, he often ends by giving it up in disgust, when once again the wily banker is a gainer at his expense. By obtaining a rate of interest upon his daily current-account balances the customer is spared this trouble; and, if he fail to induce his banker to grant it, then when his account is in credit beyond a certain agreed sum, he should take care to get a deposit-receipt.

Bankers, like individuals, are the slaves of their environment, and in the Midlands and elsewhere, where it is usual to allow a rate on the daily balances, commission is also charged on the turn-over or sums debited. Interest upon the daily creditor balances is allowed at, say, 1½ per cent. below bank rate, and a commission of ? per cent. is charged on the cheques a customer draws. The lower the rate of interest and the higher the commission rate, the more profitable, of course, is the account to the banker. The customer, therefore, when checking his banker’s charges and allowances, will take care that he is receiving the maximum rate of interest, and paying the minimum or lowest commission rate, which varies from ? to ¹/16 per cent., while it is sometimes possible to arrange for a reduced and merely nominal charge. A person, when he sees a “little interest” credited in his pass-book, is disposed to increase his balance, on the assumption that he is being allowed a rate; but before doing so he should certainly ascertain what the rate will be, for, upon examination, this allowance is occasionally found to appeal more strongly to one’s senses than to one’s critical acumen.

Having disposed of the paying average credit balances we can now discuss those accounts that have a large turn-over. A trader, for instance, who draws a considerable number of cheques during the course of a half-year, and whose balance is small, cannot expect his banker to work his account free of charge; but it is difficult to draw up a table showing what he ought to pay, for the simple reason that some bank-managers debit him with a rate which they think he will stand. A ¹/16 per cent. commission, that is to say, 1s. 3d. upon each £100 he draws out by cheque, seems a very full rate; and as there is a good market for this class of account he should not disburse one penny more. The owner, who always has a balance on the right side, can, if he find his banker unreasonable, easily negotiate with his rivals, who are delighted to see fresh faces. Indeed, it is quite possible that he may succeed in getting his account worked free, or for a nominal fee of half a guinea or so, if the turn-over is not very large.

It is now time, perhaps, to give a brief sketch of the manner in which a manager charges his ledgers at the end of the quarter or half-year. As a rule he and the accountant go through the books together; and as there is no recognized scale by which the charges are regulated it follows that they consider the man as well as the nature of his account. The business of the manager is to make his branch pay; therefore, if you do not criticize your commission rate, you may rest assured that he will succeed brilliantly at your expense. Should he think that the customer lacks experience, and is not acquainted with the fact that competition between bank and bank for creditor accounts is active, then he charges him ? per cent. When, on the other hand, he is aware that the client checks his expenses, caution is exercised; and if the manager decide to claim commission the sum debited will be extremely small.

After all, in the ordinary affairs of life one does not accept without question the price of the seller; and if a customer be so unwise as to think that a bank-manager has a higher sense of honour than his kind, then he must be prepared to take the natural consequences. For instance, D and E keep an average balance of £100 in their bankers’ hands, and the turn-over of each account is about £1,500 for the half-year. The manager, knowing that D is not critical, charges him ¹/16 per cent. commission, or 18s. 9d. E, he asserts, is a most unpleasant man, who, when charged upon a previous occasion, threatened to remove his account unless the sum were given back to him; E, therefore, who is aware that competition is one of the factors that determine price, has his business done free.

A large trader or merchant, as a rule, does not allow his banker to have the use of a considerable amount of money free of interest; and those accounts that are from, say, £1,000 to £10,000 in credit, usually belong to women, who are not accustomed to the management of money. The manager, anxious to stand well with his directors, some of whom increase his salary if he add to the profits of his branch, does not, of course, suggest to these ladies the advisability of receiving interest upon at least a portion of their balances, but, on the contrary, being wise in his generation, endeavours, by resorting to those social amenities that raise him higher and higher in their estimation, to hide the awkward word from their view, while laughing in his sleeve at their excessive credulity.

The customer who keeps his account in credit should ask his banker: “What average balance must I maintain in order that your people will work my account free?” That sum ascertained, he can act upon the advice contained in this chapter.