Compound Bank Interest
( Originally Published 1918 )
Leading banks that have savings departments, and the foremost banks given wholly to savings, have within recent years instituted a system by which depositors may get compound interest. The process is simple, and mutually beneficial to the banks and the savers.
It consists in nothing more intricate than standing aside and letting the money grow.
A depositor arranges with his savings bank to have his account credited with the savings-interest on the dates of interest payment, instead of drawing the interest for immediate use. Thus the interest becomes an addition to the deposit, and begins to draw interest from that date. This arrangement, being continued, operates like a rolling snowball and if allowed to go on will automatically double the sum originally deposited.
Compound interest is interest paid on interest. It is a cumulative operation and is the surest (which is better than the illusory quickest) way of getting "rich." Formerly it was abused and classed under the heads and drew the penalties of usury. Now and in this way, it is legitimate.
Savings banks must depend for their profits upon the use of money deposited with them, at a rate in excess of the interest they pay the depositors. The depositors couldn't earn those higher rates, because separate deposits are too small for use in the channels where higher interest rates flow, but the bank can follow those channels by the use of massed deposits. In this they are rigorously limited by law to such uses as involve no risk of loss. By permitting the addition of interest to a capital sum deposited they are actually paying it to the depositors in the form of a credit which is just as tangible as actual cash, and at the same time increasing by that credit the aggregate of credit upon which they themselves can lawfully earn a profit, and by so doing reinsure the safety of their patrons.
Gladys M. Halsey, an expert in filing systems, who has charge of the files of the Bankers' Trust Company of New York, thus describes the method followed by that institution in card indices of trust documents :
In every trust company there are many documents which must be filed daily. It may be of interest to others who have filing problems to know how the Bankers' Trust Company takes care of the documents in its trust department.
To the file clerk are given all documents relating to corporate trusts, personal trusts and the safe keeping department.
At the time a new trust account is opened, the file clerk first makes out a card, writing on it the name and the relation of the trust company, giving the account a file number. This card is filed alphabetically.
The documents before filing are given to a man in the department who dictates to a stenographer a brief analysis of the context of each document. This analysis is typed on gummed paper and given to the file clerk, who binds the document with a manuscript cover and pastes the briefing on the back, first carefully comparing it with the papers to insure accuracy. This is then entered in the document record book, which is numbered, giving the next number to the document and also the file number. The document then goes to the department, where it is entered in what is known as the "History of Trust," which constitutes a record of everything done about each account. It is only when it is stamped "Entered" that the document may at last be filed.
The document vault is filled with legal size cabinets. In these cabinets are filed numerically by the file number the document folders or envelopes. On these folders is pasted a label with the title of the account together with the file number. In the envelope itself the documents are arranged by subject—corporate documents, general documents, bond or note issue, cremations, proxies, releases, etc. Under the head of corporate documents are kept all those relating to the initial stages of the trust account—that is, the by-laws, articles of incorporation, resolutions authorizing mortgages, etc. These corporate documents are all marked by one document number at the opening of the trust account. The same procedure is followed in the case of monthly statements, certificates of equipment, insurance schedules and other certificates which come through periodically. As the documents each relate to the same subject, it has been found feasible to give the same number each time.
There are always some documents which the men must use at certain dates. The file clerk makes it her first duty each morning to refer to a card tickler system which records the documents wanted for that day.
Whenever any document is taken out of the files a paper headed "Document Out on File" is put in place of it and a record of where it was sent, by whom and when, is made by the file clerk.
Copies of mortgages, trust agreements and similar papers which cover the general business of the trust department are also kept in alphabetical arrangement in the files of the department. Duplicates are secured whenever possible and these are distributed to customers upon request.
Documents of the personal trust and safe keeping departments are filed in the same manner as the corporate documents.