Dialogue. Student: The bank must use just about every form of ex­change in a day's work

Read Hie dialogue.

Student: The bank must use just about every form of ex­change in a day's work.

Cashier: Just about. Of course, we constantly handle coins and bills of every denomination.

S.: They're what you call legal lender.

C.: Yes. Or currency. A nation's currency is its legal

tender.

But a check isn't legal lender. No. However checks are a very common form of exchange, and they are generally accepted in lieu of currency.

S.: Are traveller's checks currency?

C.: Not in a slricl sense. Bui Ihey're immediately ne-

gotiable everywhere. For instance, even merchanls will cash them under mosl circumslances.

S.: The bearer need only present proper identification.

C.: Thai's righl.

S.: Well, whal's a bank nole? Is lhal currency?

C.: Definitely. Bank notes arc issued by the banks of

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the Federal Reserve System, and they're legal len­der just as silver certificates are. Thai's what 1 thought. But gelling haek to checks, why are bank drafts sometimes preferred over checks?

Well, in the case of a check, Ihe parly who signs it is the only one who guarantees payment. But a bank draft is issued and guaranteed by a bank. Is that true of cashier's checks, too? Yes. And also of certified checks and bank money orders.

What about sight drafts? Now, sight drafts are different. They're a form of

request for payment through a bank.

Questions on the dialogue:

1. What forms of exchange are called legal lender?

2. Why are checks a common form of exchange?

3. How are traveller's checks useful?

4. Which banks in the USA may issue bank notes?

5. What is the difference between a check and a bank draft?

6. What do cashier's checks, certified checks and bank drafts
have in common?

7. How do sight drafts differ?

Text

The work of bank centres around money and financial ser­vices. Virtually any activily involving money or advice about financial matters is undertaken by all the commercial banks. The immediate service offered by the bank is the receipt for deposit of coins, notes and cheques and (he cashing of cheques, through current accounts. Coins and notes in circulation have the stalus of "legal lender" lhat is to say they must be laken in payment of a debt although the extenl to which this applies

in the case of coins is deliberately restricted for the sake of convenience.

The most common means of payment, particularly for sig­nificant sums of money, is the cheque since it is both safer and more convenient than using cash. However, it is not le­gal tender and creditors can refuse to accept it if they wish. Normally both national cheques and traveller's cheques arc readily negotiable if the bearer has some means of proving his identity and the creditor can be sure that the cheque will be «honoured». To assist the use of cheques banks now provide their customers with bankers cards which, when used in as­sociation with a cheque, will guarantee it up to a stated maxi­mum. If a customer wishes to make payments of large amounts of money by cheque and is not known to the creditor, then he may obtain a «certified cheque» from his bank. Such a cheque is signed by the bank and therefore payment is guaranteed.

Those trading overseas, or in conditions where there may be a significant time lapse between sending out goods and their receipt by the customer, may use a Bill of Exchange as a means of payment. This is really a post dated cheque which assures the creditor payment but also gives the buyer opportunity to inspect the goods before the transaction is completed. Those whose credit standing is unknown may have to get the Bill «accepted» before a creditor will take it. Such a process guar­antees payment and most work of this kind is undertaken by the merchant banks. Because Bills arc post dated creditors may have to wait some time for their money. They can over­come this problem by endorsing the Bill and then cither dis­counting it with a Discount House or a bank or passing it on to another trader in settlement of a debt of their own. By the time it comes to maturity a Bill may have passed through sev­eral hands and on each occasion it must be endorsed. The commercial banks participate in this activity in two ways: in

part by lending money to the discount houses and in part by

discounting bills for their own customers.

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Questions on the text:

1. What forms of money are called legal tender?

2. Why are cheques a common form of exchange?

3. What is the main purpose of a banker's card?

4. What is the special feature of a certified cheque?

5. What is the main use of a Bill of Exchange?

6. Why does a Bill sometimes have to be "accepted"?

7. In which two ways might a creditor who needed the money
dispose of a Bill?

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