Budget accounts

This type of account assists the ordinary man and woman to monitor and regulate their cash flow. It helps to avoid periods of shortages of funds with those periods where a surplus of cash is available. Again, each bank has its own name for this type of account, but basically, after consultation with a branch manager or senior clerk, the customer calculates his total domestic expenditure, which includes, rates, gas, electricity, insurance, mortgage, and so on. The total of all expenses plus the bank's charges are divided by twelve, and the customer then signs an instruction to transfer, once a month, an amount from current to budget account. A cheque book is given to the customer who may pay his bills as and when they fall due. Providing all calculations are correct, at the end of the twelve month period, there should be a nil balance, when the whole exercise is started all over again.

Loan accounts

One of the methods by which a bank earns its profit is by lending money to its customers. A loan to an individual may be for the purchase of consumer durables (e.g. washing machines, TVs) or to redecorate the house or flat, or for a holiday, and so on. For a businessman, such an advance may be for the purchase of stock or fixed assets. In both cases the loan may be for a period of two years and upwards. The interest charged will be stated at x per cent above the bank's base rate. The interest calculated is debited either quarterly or half yearly to the current or the loan account at the customer's option.

Personal loan accounts

This loan is usually for an individual who again wishes to purchase, for example, consumer durables, but in this case he will know precisely the amount he has to pay each week/month to repay the debt. Once the amount lent is known, the bank will add to this an amount for the total interest due for the whole period, and request the customer to pay one twenty-fourth or one thirty-sixth back each month, or whatever repayment is agreed between banker and customer.

Under the Consumer Credit Act 1974, the customer will be informed of the Annual Percentage Rate (APR), the amount of the loan and the amount of the interest added to that loan. Should interest rates move either up or down, this will not affect the loan agreement, so that within the loan time, the customer need not concern himself if rates move upwards, but may feel inclined to either repay the loan earlier or negotiate a new loan if rates move downwards.

The added attraction of this type of loan, from the customer's point of view, is that he may go to a retail outlet, purchase goods for cash or offer a cheque, which may attract a cash discount, which could be sufficient to offset any interest paid.

With this type of account, security is not usually requested by the bank, and with a built-in insurance, should anything happen to the customer, the debt is cancelled and the deceased's family is not encumbered with a debt.

XXI. Add the words and expressions that complete the following sentences below:

deposit account credit card night safe letter of credit safe (for safety) deposit box

current account investment advice checkbook foreign exchange loans

banker’s draft mortgage standing order transfer overdraft

1. When I opened the account, they gave me a _______ and a paying-in hook.

2. Banks' basic business used to be making ______, hut they now often earn more from securities trading and financial services.

3. Most banks are able to offer ______ to rich clients.

4. An importer who has to pay a hilt in a foreign currency, and so cannot use a cheque, can arrange to pay by ______.

5. Outside banking hours, shops and other businesses can deposit money in the banks ______.

6. Before travelling abroad, I always get some currency from the _______ department of the bank.

7. I pay regular bills every month with a ______.

8. My salary is paid directly into my account every month by an automatic ______.

9. Nearly all restaurants accept payment by ______.

10. Most people in Britain who buy a house take out a ______.

11. Since I sometimes spend more than I have in my current account, I have arranged an ______.

12. If you want higher interest, and don't need to withdraw money too often, you should get a ______.

13. A _______ is a paper issued by a buyer's bank which guarantees that the seller will be paid.

14. If you want to write cheques and have easy access to your money at any time, you should have a _______.

15. People with valuables often keep them in a ______ in a bank.