_Certified Check._--Suppose, however, that you are writing this check to pay a debt to a stranger who lives in another city. He may hesitate to accept it as money. That he may have no cause to doubt your ability to pay the check, you take it to your bank to have the cashier investigate your account. If he finds that you have sufficient funds, he writes or stamps _Accepted_ or _Certified_ on the check and signs his name. At the same time the amount of the check is deducted from your account. Such a check is accepted without question when the holder is properly identified.

_Endors.e.m.e.nt._--If A gives you his check for twenty-five dollars, you could not receive the money until you had endorsed the check; that is, put your name on the back, which is, in effect, giving a receipt for the money. You may do this in various ways. You may endorse:

1. In blank; that is, merely write your name across the back.

2. In full, by saying, "Pay to the order of ----" and signing your name.

3. By restricting the payment to a particular person; as, "Pay to ----" This check cannot now be cashed by anyone except the one named in the endors.e.m.e.nt.

[Ill.u.s.tration: EXPRESS MONEY ORDER]

_Express Money Order._--An express money order is much like a check, except that it is drawn on an express company instead of on a bank and reads, for example: Continental Express Company agrees to transmit and pay to the order of ---- (the one to whom you are sending the money) ---- (the amount). The order is signed by the treasurer of the company and countersigned by the agent who sells it. You can buy such an order at any express office. It may be endorsed like a check.

[Ill.u.s.tration: POSTAL MONEY ORDER]

_Postal Money Order._--The other form of money order, the postal, is an agreement signed by the postmaster of one city that the postmaster of another city will pay the amount of money named in the order to the person named in the order.

_Bank Draft._--A bank draft is very much like a check, except that instead of two individuals dealing with each other two banks conduct the transaction, their places of business being in different cities or villages. A bank draft is sometimes called a bank check, because in the case of both a draft and a check one party draws upon another with whom the first has funds deposited. As a general rule, banks and business houses require that remittances be sent to them by drafts drawn on New York or Chicago banks, as there is a charge called _exchange_ made in the collection of checks drawn on local banks.

In the draft that follows, the State Bank of Utah, of which Henry T.

McEwan is a.s.sistant Cashier, makes out the draft. The bank which is ordered to pay the money is the National Park Bank of New York. The money is to be paid to Henry L. Fowler. The State Bank of Utah is called the drawer; the National Park Bank of New York, on whom the draft is drawn, is the drawee; Henry L. Fowler is the payee.

[Ill.u.s.tration: BANK DRAFT]

[Ill.u.s.tration: ENDORs.e.m.e.nT]

The payment indicated above was probably made without actually sending the money from Salt Lake City to New York. It was done in this way:

Henry L. Fowler of Salt Lake City owes one hundred dollars to a man living in an Eastern city, let us say Charles Emery of Rochester, N. Y.

Mr. Fowler goes to the State Bank of Utah in Salt Lake City and "buys a draft on New York," made payable to himself. The bank makes out the above, charging Mr. Fowler one hundred dollars plus a fraction of one per cent for its trouble. Mr. Fowler endorses it in full to Mr. Emery of Rochester and sends the draft to the latter. He has the draft made payable to himself so that the endors.e.m.e.nt will const.i.tute a full record of the transaction. Mr. Emery takes the draft to his own bank in Rochester, endorses it in blank, and receives the one hundred dollars.

Thus Mr. Fowler has paid out the money and Mr. Emery has received it.

The way the banks conduct the transaction is as follows: There are certain big money centers in the country; e.g., New York, Chicago, St.

Louis, San Francisco. Important banks in other places have money on deposit in at least one bank in each of these centers. The banks which thus deal with one another are called _correspondents_. The National Park Bank is the correspondent of the State Bank of Utah. When Mr. Emery cashes the draft at his Rochester bank, the latter sends it to its New York correspondent, and at the same time charges the correspondent one hundred dollars. The correspondent presents the draft to the National Park Bank, which pays the money and charges the same amount to the State Bank of Utah. Explain how this settles the transaction.

_Time Draft._--A time draft is much like a bank draft, in that two banks conduct the princ.i.p.al part of the transaction for two individuals, but no money is actually paid at the time the draft is drawn. The details of a transaction of this kind are explained on the following page.

[Ill.u.s.tration: TIME DRAFT]

Horace Prang of 1008 Elm Street, Columbus, Ohio, owes Loetzer & Co. five hundred dollars, due August 27, 1915. Loetzer & Co. make out the draft above and deposit it in the Bank of Buffalo. The latter sends the draft to its correspondent in Columbus, which presents the draft to Horace Prang. If he is willing to pay the note when it falls due, he writes across the face of it, "_Accepted_" adds the date, and signs his name.

It is now returned to the Bank of Buffalo. The Bank of Buffalo will then discount the draft for Loetzer & Co.

_Sight Draft._--A sight draft is much like a time draft, except that the amount is paid by the person on whom it is drawn as soon as it is presented, instead of after a stipulated length of time.

[Ill.u.s.tration: SIGHT DRAFT]

Suppose the Empire Elevator Co. of Buffalo has sold $420 worth of grain to the Smith Milling Co. of Springfield, Ma.s.s. When the grain is loaded on the cars, the railroad company gives the Empire Elevator Co. a bill of lading. Now, the Smith Milling Co. must possess this bill of lading before it can take the grain from the cars at Springfield. The Empire Elevator Co. deposits the bill of lading with the above draft in the Marine National Bank of Buffalo. This bank sends both to its correspondent in Springfield. The Springfield bank presents the draft to the Smith Milling Co., who may take the grain from the cars on payment of the draft. In case of non-payment, both draft and bill of lading are returned to the Marine National Bank of Buffalo, and the Empire Elevator Co. must make arrangements for the return or the disposal of the grain.

=Exercise 301=

1. F. R. Thompson, sales manager of the New York Trust and Savings Bank, sends a circular letter to a number of banks, saying that he is enclosing a booklet that describes a number of bonds suitable for the security of postal savings deposits, the legality of which has been carefully investigated. In his letter he mentions especially Omaha, Nebraska, School 4% bonds, price to net 4.40%; Seattle, Washington, Harbor 5% bonds, price to net 4%; and Hoquiam, Washington, Bridge 5% bonds, price to net 5%. Reproduce the letter, addressing it to W. W. Fallows, Cashier of the Mercantile National Bank of Pueblo, Colorado.

2. Mr. Fallows answers, saying that his knowledge of the postal savings law is vague and that he would be glad if Mr. Thompson would give him definite information on the subject.

3. Mr. Thompson replies that he is enclosing a copy of the postal savings law. He a.s.sures Mr. Fallows that he can serve the latter both in buying the proper securities and in depositing them with the Treasurer of the United States. Application for such deposits must be made by the bank itself. Mr. Thompson will gladly inform him if Mr. Fallows does not know the steps to be taken or the report to be submitted.

4. Punctuate, using a letterhead:

Mercantile Trust Company New York City Dec 2 19-- manager the bank of Scotland 3c bishop E C London England dear sir we are sending you herewith advice of the issuance of our circular letter of credit No. 262 in favor of Miss Helen Jackson for 300 pounds sterling Miss Jackson is at present in Paris France and the letter of credit has been forwarded to Messrs Thomas Cooke and Son 1 Place de l'Opera Paris we have requested Messrs Thomas Cooke and Son to forward to you two specimens of Miss Jacksons signature which we have signed and forwarded to Messrs Thomas Cooke and Son for that purpose so that you may have these signatures before any drafts against the letter of credit are presented to you yours very truly James R Hudson treasurer.

What is a letter of credit? How did Miss Jackson get it?

The Bank of Scotland is the correspondent of the Mercantile Trust Company. Explain.

Why should the New York bank forward Miss Jackson's signature?

5. Write the letter that the Mercantile Trust Company sends to Messrs. Thomas Cooke and Son.

6. Write the letter that Messrs. Thomas Cooke and Son send to the Bank of Scotland.

7. W. T. Randall, cashier of the Milwaukee Trust and Savings Bank, Milwaukee, Wis., writes a letter, the purpose of which is to secure savings accounts. A club of 500 members is to be formed. Each member is to buy a share by paying one dollar and to pay one dollar per week per share, the amount to draw interest at 3%.

After forty-eight weeks he gets credit for fifty dollars per share, thus securing over 5% interest on his money. Make the offer attractive.

8. Some time ago a bank in your city discounted a note held by George Carpenter, signed by Martin Kugerman.

The note falls due in ten days. As cashier write to Mr. Kugerman, telling him that you hold the note and that you hope he will be able to remit on the day of maturity.

9. Your bank loaned Clarence Wentworth $500 for ninety days, taking as security $700 worth of collateral. The note falls due in a week. Write to Mr. Wentworth, reminding him that the note falls due and asking him whether he wishes to pay it off or whether he wishes it extended.

10. John Elsworth, who has an account with you, writes, saying that by registered mail he is sending you certificates of 20 shares Union Pacific common stock, 50 shares National Biscuit Co. preferred stock, 5 (bonds) American Telephone and Telegraph convertible 4's, 3 (bonds) New York and East River Gas Co. first mortgage 5's. He asks you to take care of them and collect dividends and interest when they are due, crediting them to his account.

11. Your correspondent, the First National Bank of Janesville, Wis., writes, asking you to forward by registered mail $5,000 in currency.

=Exercise 302=

1. Mr. Henry Carroll of Wausau, Wis., writes to Mr.

Randall (Exercise 301, 7), asking him to buy 10 shares of C. & N. W. R. R. preferred stock at 134 or better.

When they are bought, he adds, they can be sent through any bank in Wausau.

2. Mr. Randall replies by sending the 10 shares of stock to the bank's correspondent in Wausau, the First National Bank, telling the latter to deliver them to Mr. Henry Carroll on payment of the enclosed draft for $1340 with exchange. Write the letter.

3. A dressmaker in South Bend, Ind., has applied to Marshall Field & Co., Retail, State and Washington Streets, Chicago, for a charge account. The department store makes inquiries concerning her at her bank, the Commercial and Savings Bank of South Bend. Write the letter.

4. The bank replies that she has maintained a small but steady balance, that she has never overdrawn her account, and that in their opinion her credit would be good up to $100 monthly. Write the letter.

5. Theodore Buchanan of St. Louis sends Philip Newborg of your city a check for $100 with which he pays a debt to Charles Springer of Minneapolis. Springer endorses it and deposits it in the Security National Bank. The check is returned marked N.S.F., and the Security National Bank notifies Springer of the situation and of the fact that his account has been charged with $104, the amount of the draft plus expenses.

6. One of the depositors of the Milwaukee Trust and Savings Bank brings to the Cashier a note which is about due, and asks the bank to collect it. The maker of the note is William T. Adams of Seattle. The Cashier writes to the bank's correspondent in Seattle, the Scandinavian American Bank, asking the latter to collect. Write the letter. (See Exercise 301, 7.)