Checking accounts are used everyday by millions of people. However, many people today do not realize that while they are taking this financial instrument for granted, it was not always a part of banking. What we know of as the modern checking account was developed over hundreds of years as a response to consumer need for a greater access to cash.
The concept of the checking account did not arise until the early part of the 1500’s. It came about in the Netherlands when Amsterdam was an important center for merchant activity. Merchants who were amassing large sums of money needed a place to put their cash.
“Cashiers” arose to meet this need. Cashiers would keep up on to the money in exchange for a small fee. You may not be a merchant, but is this starting to sound familiar in addition?
Soon a great need arose due to a growing competition as more and more people rushed into becoming cashiers. This caused the cost of giving one’s money to a cashier to drop. It also caused the cashiers themselves to begin to seek inventive and new ways to attract customers to choose them.
These new ways of attracting customers took the form of new or additional sets grated to a depositor. Much like modern edges, these cashiers had to come up with new sets or already gimmicks to try an compete for customers. Today’s gimmicks appear to be quite a bit different than those of the early 1500s. However, it’s important to realize that today we take the modern checking explain granted. Back then it was just being invented because banking was in effect nevertheless in its beginning.
The idea that someone could come in with a observe from a depositor that would allow them to withdraw money from the depositor’s account was certainly a new and novel idea. This was one of the new sets that popped up to meet the need and to attract customers. Such a observe today would be called a “Check.” Much like a cancelled check is kept for a paper trail, the written order from the depositor was kept back then to provide proof of the move of funds.
This new development really oiled the gears of the trade industry allowing for the move of money to happen much more efficiently. Such an improvement in efficiency helped to enhance the profitability of trade and of the merchant profession.
Because of the mobility of the merchants, the concept of what we now know of as the checking account soon spread to other countries beyond the Netherlands. These countries included England, a major world strength, and her many colonies upon which the sun would ‘never set.’ Included in the colonies were those in what would become America.
The influence spread to the original American colonies in 1681. Massachusetts land barons began mortgaging their plots of land to the cashiers who then in turn began providing accounts that the landlords could then use to write notes or checks.
The modernization of the checking account didn’t come until later. It wasn’t until the 1700s that checks in the sense that we understand them today began to appear. In England, edges began to print checks on behalf of their customers. These checks featured serial numbers to help with tracking them. In fact, it wasn’t until this time that the term “check” truly started being used to refer to these financial notes.
The eighteenth century really marked the period in which these once novel new sets began to be uniform and extensive. This is the period when enough edges began to standardize their checks that there arose the problem of getting checks cleared. This precipitated the creation of the very first clearing houses concentrated on streamlining the processing of checks.