Deposit accounts

Interest-earning cheque accounting

Gradually, the smaller banks and some of the larger banks are attracting customers by offering accounts that not only give the normal current-account facilities but will offer interest on the daily balances.

The conditions on this type of account tend to vary from bank to bank, but in general terms a minimum balance of about £2,000 is expected and cheques for not less than £250 may be drawn.

Unlike a normal deposit account, the withdrawal of funds do not need a notice of seven days, or suffer the loss of seven days' interest. This hybrid account is very attractive to customers and so it is expected that as competition grows between banks, the conditions imposed for its maintenance may disappear and all current accounts may eventually attract interest.

There are various types of deposit account, but basically it is an account that attracts interest on the cleared funds, calculated on a daily basis. Normally, funds that are not needed in a current account are transferred to a deposit account, and a reverse entry is passed when these funds are needed. The individual often uses this type of account as a simple and easy method of putting money aside to meet holiday expenses, Christmas, birthday presents, and so on.

No cheque book is given nor is a cheque card available with this account, but a paying-in book is available if necessary. Statements can be sent at regular intervals. No overdraft is permitted and interest is paid either quarterly or half yearly, depending on the banks policy, but it should be remembered that for individuals, joint accounts, partnerships, trustees and other non-corporate customers, except non-residents, interest is paid net of tax, that is tax is deducted by the bank at the Composite Rate of Tax (CRT). This brings the interest-bearing accounts in line with those of building societies.

Other than the basic deposit account, each bank may offer four or five other types. The first is a form of 'savings account'. Again, each bank will have its own pet name for this type of account, but basically the customer is encouraged to transfer a regular sum each month to this account, and for this he may be offered between 1.0 and 1.5 per cent above the basic rate of interest. The disadvantage is that the bank will only permit withdrawals twice a year. Many customers find this a painless way of saving as it can be arranged that the current account is debited on salary day, so that funds are available for such occasions as Christmas, a deposit for a house, birthdays, and so on.

Amounts of £10,000 and above may be put on a special type of fixed-term deposit account; this attracts a higher rate of interest. Usually, the longer the term, the higher the rate of interest. Such amounts are often dealt with by the treasurer's department at head office. Once the rate and term is fixed, a legally binding contract has been made and it is usual for the funds to be left on the account until maturity. Should the customer require early repayment, then he is penalized.

Another type of deposit account is the savings account for children. In order to attract children, special money boxes are available which can usually be opened at home. The bank would encourage the young customer to come to the branch, however, and credit the account with the contents.

Each bank has its own variety of deposit accounts. Basically, the interest earned on deposits will depend on the length of time, rate of interest appertaining and the amount deposited. These rates are displayed in the banking hall of each branch.

Дата добавления: 2014-12-29