CASH ACCOUNT, or CASII CREDIT, a form of account with a bank, by which a person is entitled to draw out sums as required by way of loan to a stipulated amount. The practice began about 1729 in Scotland, with the banks of which country it is still pecu liarly identified; but it is not unknown elsewhere, though on a somewhat different plan. In connection with the Scotch banks, the C. A. system is placed on a distinct and secure basis, which we shall briefly describe. The persons procuring a credit of this kind are for the most part retail-dealers, tradesmen, and farmers, who possess a lim ited capital, and need occasional loans. Instead of borrowing money by bills or mort gages, they apply to a bank for a C. A. to the extent, it may be, of £500. In the origin of the system, the bank may be said to have been influenced by three considera tions—first, the necessity for making advantageous use of i cs capital; second, the desire to extend its issues of small notes; and third,' the nature of the security offered. Since sir Robert Peers act restricting circulation of notes, the second of these reasons no longer operates; for the banks are now much above their authorized issue, and must hold an equal amount of coin against the surplus. What the bank particularly wants, is a "customer who will be constantly depositing sums in notes of other banks, and drawing out sums in its own notes. The C. A. system aids this process. It secures a customer who will be frequently operating on his account, according to the exigen cies Of his business, and whose overdrafts, as well as deposits, tend to benefit the concern. Obviously, for the debtor, the system works more advantageously than when a fixed sum is borrowed, for in that case interest would run on for the whole amount, whereas by a C. A. the trader merely draws what lie requires; and by paying in his surplus money in small sums, he is charged with interest only on the sum actually at his debit from day to day. In negotiating a C. A., a bond is prepared by the bank
stating the amount and the nature of the security, the cost of which is borne by the borrower. Banks often, in security, accept heritable property and policies of life insur ance, but more commonly two persons in good credit become cautioners, or co-obli gants along with the principal. Unless the liability of the cautioners respectively be expressly limited in the bond, each is liable for the whole amount. If the bank lib erates one cautioner without the consent of the other, it loses its recourse. This recourse is not lost by accepting a dividend from the sequestrated (bankrupt) estate of a princi pal or cautioner; but it will be lost by accepting a composition from either of these persons without consent of the other. The bank can at any time stop the credit, and call for payment of the balance due. A cautioner can at any time.withdraw Ids name from the credit, on paying up the balance, and the bank is bound to assign the debt to him. While cash accounts may be of great service to traders who act upon them dis creetly, it is found that, in too many instances, these accounts are used as a dead-loan to the entire amount stipulated for; and for this, as well as a reason above assigned, banks care now very much less for this kind of business than formerly. Properly, traders are to look on the money procured on cash credits not as an addition to capi tal, but merely a temporary substitute for current business purposes while the capita] is out with customers, and to be replaced accordingly until again required. It may be added, that the progress of commercial wealth in Scotland, now greatly lessens the necessity for having recourse to the C. A. system. See MARGINAL CREDIT.