or triplicate sheet is given a number and placed, according to a numerical arrangement, in the discount register. A form is made out for each note purchased or discounted. Another form commonly used by banks is a control sheet, one for direct liability of the account and one for indirect liability. These sheets are placed in front of the various individual note records of the respective accounts. Each control sheet contains FIG. 14.-Control sheet (yellow) showing direct liability of a given account. Similar blue sheet shows all indirect or contingent liability of each account. a summary of all the notes held by the bank against any one account, showing the date of purchase; sureties, indorsers and collateral; when paid; due date; charges; credits; and balance (see Fig. 14). SELECTED REFERENCES BLANTON, B. H.: "Credit, Its Principles and Practice," Pt. I, chap. 6. ETTINGER, R. P., and GOLIEB, D. E.: "Credits and Collections," chap. 3. FITZGERALD, J. A.: "Making Use of a Bank," chaps. 7 and 8. HAGERTY, J. E.: "Mercantile Credit," Pt. I, chap. 3. HOLDSWORTH, J. T.: "Money and Banking," chaps. 7 and 10. PRUDDEN, R. F.: "The Bank Credit Investigator," chaps. 1 and 9. CHAPTER IV RETAIL CREDITS Definition and Significance.-Retail or personal credit is the credit a merchant extends to an individual or his family when goods are purchased for consumption purposes. Although the retailer is the merchant primarily and directly interested in this type of credit, yet jobbers, functional middlemen, and manufacturers are indirectly, though not less vitally, concerned with it. The success in credit granting along the entire chain of distribution depends ultimately upon the payments by consumers to retailers. Prompt payment of one's obligations to the retailer enables the latter to cancel his obligations incurred in the purchase of these goods from the wholesaler or jobber. The wholesaler, in turn, is in a position as a result to meet his obligations incurred in the purchase of merchandise from functional middlemen or manufacturers. As a corollary of this it naturally follows that, should the ultimate consumer fail to meet his obligations, the consequent weakness of the retailer will invariably be reflected all along the various links in the chain of distribution. When such a situation becomes accentuated, the whole credit. system is threatened. It is obvious from the foregoing that the larger part of the credit system is built around personal or retail credit. The jobber grants credit to the retailer in order to enable the latter to meet the demands of the consuming public. In his turn, the jobber demands credit extensions from his sources of supply. Finally, manufacturers must either possess adequate financial resources of their own, or else resort to the aid of functional middlemen, such as brokers, commission houses, or factors. In addition, all of them enlist the aid of the financial specialist-the commercial banker ARGUMENTS FOR RETAIL CREDITS It is frequently argued that, from the standpoint of society at large, it is doubtful whether retail credit is necessary. Even some retail merchants themselves occasionally doubt the feasibility of such a policy. Excellent evidence of an unfavorable attitude toward retail credit granting is afforded by the enormous growth of stores since 1910 based on a "cash and carry system." Some of the strongest arguments, nevertheless, are favoring the adoption and use of credit policies. These arguments may be arranged in two groups according to the parties interested. From the standpoint of the merchant it is argued that: 1. Credit Ties Up Trade. It makes regular customers. Patrons with charge accounts usually give their entire trade in a given line to a limited number of stores. A credit customer, as a rule, trades regularly in the store with which credit connections have been established. At least, the first choice is given the institution in which a charge account is had. Thus, credit makes for repeat business. 2. Credit Sales Are Larger on the Average.-Cash customers are constantly on the lookout for startling bargains. They are attracted to a larger extent by advertising, are interested in a larger measure in price, and generally shop around more. This group constitutes the class of habitual bargain hunters, who, on the average, muss up larger quantities of merchandise, flit from store to store, and buy less per person. 3. Credit Customers Buy More.-On the average, it is believed, customers having charge accounts buy more freely and are somewhat more extravagant. They do not for the most part realize the value of money, because of postponement in payment, to the same extent to which cash buyers do. 4. Credit Develops Confidence. By trusting goods to a customer, the store, in turn, gains the confidence of the buyer. Confidence breeds good will, without which no merchant can claim success. A credit system also insures permanency of the store in the community. A merchant of a dishonest character will not trade on a credit basis. On the other hand, the straightforward retailer, by dealing squarely with his trade, does not fear that his customers will refuse payment for value received. 5. Credit Attracts Better Trade.-Contrasted with cash stores, businesses selling on credit appeal to a better type of trade which is interested primarily in service, quality, and style, and is only incidentally concerned with price. Cash stores usually attract the poorest and cheapest trade and become known as cheap stores. Most of the urban department stores operating purely on a cash basis are of this type. 6. Credit Irons Out Business Peaks.-It makes for a better distribution of business volume. Cash trade tends to peak on certain days, such as Saturdays and pre-holiday periods, when wages or salaries are obtained and cash is readily available. Credit customers, on the contrary, buy whenever goods are needed, irrespective of their possession or lack of money at the time. Peaks are costly. Because of them, larger inventories must be carried regularly and the selling problem becomes more complex. Excessive clerical help must be normally carried on the pay roll and many "extras" be kept in touch with. In support of this argument, it may be stated that, according to investigations conducted by the author, department stores selling on both cash and credit report that on Saturdays the increase in volume of business comes primarily from cash purchasers and that no noticeable variation is observed in the sales to credit accounts on such days. Credit thus tends to prevent concentration of sales and irons out the peaks in business. 7. Credit Reduces Complaints.-Failure to deliver purchases promptly does not tend to arouse any suspicion on part of credit customers, whereas purchasers who have paid in advance are likely to get disgruntled and panicky under such circumstances and complaints are immediately registered to that effect. The assumption on which this argument is based is that consumers lack confidence in a store which insists upon payment for the goods in advance, since only dishonest merchants refuse to grant credit. It is obvious that this line of reasoning is not entirely sound. Credit may be denied because of a number of reasons. The particular credit risk may be inferior, or the store may operate on a purely cash basis for economic reasons, as will be indicated in the following pages. 8. Credit Sales Are More Economical Than C.O.D. Sales. -To begin with, when sales are on a C.O.D. basis, a special system of handling them must be provided in the delivery department. They must be segregated from the others and properly accounted for. Additional clerical help is necessitated and often a separate C.O.D. room is maintained. Moreover, when the customer is not at home at time of delivery the merchandise must be taken back and "sent over" again, thereby bringing about duplication of effort. If the customer is at home, |