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Interest on Deposit Receipt

cent, days, rate, table and date

INTEREST ON DEPOSIT RECEIPT. The interest on a deposit receipt is quickly ascertained from the usual interest tables when the rate is the same during all the period that the money has been with the banker, but when, as is customary in certain districts, the rate varies from time to time, a special table requires to be prepared in order to assist in making the calculation.

I f the interest table which is used is a 5 per cent. one and the rate to be allowed on a deposit receipt is 2 per cent., the interest on 0 for one day will be two-fifths or •-I of the interest shown in the 5 per cent. table. In other words, the interest on 0 for one day at 2 per cent. is the same as interest on 0 for •4 of a day at 5 per cent. ; for two days it will be •8 of a day, for three days 1.2 days at 5 per cent., and so on, •4 being added each day.

When the rate is 3 per cent., •6 is added. each day, when 2i per cent. •5 is added, when 4 per cent. -8 is, added, being added for each 1- per cent. increase in the rate.

The following is a short specimen table :— If a deposit receipt which was issued on January 3, 1910, is presented for payment • on January 16, it will be seen from the above• table that interest must be allowed during those thirteen days at three different rates, January 6 at 2 per cent., 6 to 12 at 3 per cent., 12 to 16 at 23- per cent.

To ascertain the interest due, the decimals on January 3 must be deducted from those on 16, thus, the difference, 6.8, being the number of days at 5 per cent. upon the amount of the deposit receipt to give the interest required. In the case supposed, if the amount of the deposit is £100, the interest is quickly found by referring to a 5 per cent. interest table and finding the interest on the amount, 000, for 6•8 days.

All calculations of interest should be made by one clerk and checked by another, and when the receipt is to be paid, a note of the amount of interest should be written on it and be initialled by both clerks.

Each half-year, the interest due to date.

• upon all deposit receipts is calculated and • set aside before the profits of a bank are ascertained, the amount being carried forward into the next half-year to meet the• interest up to that date when the receipts are presented for payment.

In the case of a receipt subject to notice• of withdrawal, after notice has been received it is the practice of some banks, when the money is not withdrawn, to cease adding interest after the date when the receipt was due to be repaid. Banks do not, however, always insist upon notice being given, and when the deposit receipts are paid without notice, some banks deduct from the interest due to date a sum equal to the interest which would have accrued during the period between the date of payment and the date when it would have been due to be paid if notice had been given ; in other words, interest is deducted for the days still to run before the receipt is due. (See DEPOSIT RECEIPT.) Interest is not, as a rule, allowed upon a deposit receipt until the money has remained in the bank for a certain period, say, four teen days or a month, and in some banks for two months.

When a bank allows interest on current accounts it usually gives a slightly higher rate for deposits, and in the case of deposits for a fixed period a slightly higher rate still.