Credit Reports

Reflecting on Checking:

Everybody knows that a lot of people keep track of credit card activity.  The network for credit card information is so highly developed that credit cards information is often available to vendors at the point of retail sale.  Just think of the last time you used your debit or credit card and you will see just what I mean.  But a lot of people lose track of the bigger credit picture when they only think about how they are handling their credit cards.

There are; others who watch and record checking account activity, and they often do it for the same reasons that people look at your other forms of credit.  So you want to make sure that all your ducks are lined up in a row so that your credit stays good at every place you go.  This is how you make your credit grow. I the old days people used checks for several reasons.  Check users often were people who didn’t wan to use credit cards.

Perhaps they were responding to the terms of a seller who wished to be paid by check.  Or maybe they wanted the document as a memorial, or record, of their transaction. No matter what the reason, checking offered the buyer something that instant credit could not, and that is the element of time.  Instant credit may not give you the chance to try-out and adequately inspect the item to be purchased.  It is not uncommon for something to end up working differently, or looking differently, than we think it will when we see it on the showroom floor.

The check has to clear the bank and go through posting- and this may take a little time.  That often gives the buyer the chance to study the purchased items really well and better determine if it meets their needs.  If it is not right the buyer can cancel the check and not have to go through any problems in getting their money back.  The buyer can just say, for example, that the washer does not fit the space or décor of the house and stop the check.  Then the seller can come out and get the item and the buyer gets their money back.

Well, some check users noticed that the time between the issuing of the check and its presentation to a bank and processing represented a period of time that they could say they had credit that was not actually there, and some people did just that. Sometimes they would pay for things at the end of the week and hope to replace the funds by the time the check went through.  The distances the bank of the buyer and seller make this crooked little game all the more interesting and inviting.  The problem was that nobody was happy if the person who wrote the check did not come up with the money.

Bankers figured out what was happening to them but their hands were bound by the law.  The laws of checks call for certain procedures in their processing and some of these rules mention the presentation of the actual check.  What this means is that if your bank is in California and you go to Florida to charter a boat to fish for marlin, like Hemingway used to do, and you use checks to pay the Captain and crew in Florida, that no one will know if you don’t actually have the money in your account until the Captain’s bank seeks payment of the check from the bank in California.

To see what this recipe can lead to just remember that credit agencies keep information on checking history.  This means that third parties can see this information and make judgments about you on its basis!  Will they even want ask you if you can explain a legitimate mistake?  Will they even care?  Let’s just say that some unhappy consumers have learned, to their horror and dread, that even one bounced check reported by one of these services may be enough to make it difficult for you to open a new transaction account or get a merchant to accept your check as payment.

This state of affairs has had bankers unhappy for some time, but now it seems that they’ve done it- they’ve found a way to process checks more quickly and that means that there is less and less time from time you pay with a check to the time the balance is displayed for the check. Check 21 is the name of a new law passed a few years ago to help speed up check chasing by letting the bank sidestep some of the processing procedures required by law.

The bank can get away with making a “substitute check” that it can pass freely.  A substitute check is the legal equivalent of the original check.  It has all the same  all the information contained on the original check.  Now there is nothing in the law that says that banks have to accept checks in this electronic form but you may discover these substitute checks among the real ones you get with your periodic statement and that is why they are in there.

What this means in layman’s terms is that each of us has to be a little more careful in managing our checking account these days because you don’t want to snared in a broad net that scoops you up along with some shady characters. So for the unscrupulous check writer this makes writing checks for amounts beyond those available at the time they write the check a kind of  Russian roulette proposition.

They have to ask themselves just one question, do they feel lucky?  But for the average consumer it presents a sort of mine-field where you could find yourself standing on shay ground because a shorter timeframe than you are used is in effect. Check reporting is there to protect financial institutions and retailers from losses due to over drawn or fraudulent checks. What’s more, the Fair Credit Reporting Act (FCRA) is federal law that lets records of checking “irregularities” that come to their attention to stay on your private records for as many as seven years.

Electronic Banking

Electronic Banking

You’re out of cash and out of time, because it is 9:45pm and the bank is closed.  But this doesn’t have to mean that you’re out of luck.  The backbone of today’s economic structure is technology.  And, from the days of the very first computer right up to the present time, the great promise that every small change in technology offers only helps strengthen and improve our great way of life. For banking consumers this translates into electronic banking.  You get access to your cash at any time and on any day.  Automated banking means that a machine does all the work.  There doesn’t have to be a teller present; and if there isn’t a teller than that means there aren’t any pesky labor laws with all these rules that while get in between you and the cash that you crave so dearly.  Machines don’t get holidays and you don’t have to care about how many hours in a row they have to work, day or night! The way it works is that your funds are transferred by communication between two or more computers.  Electronic banking, also known as electronic fund transfer (EFT), uses hard-working and tireless technology in order to get around having to rely on paper records in order to do the banking.  The electronic account information transfer system just lets things happen more quickly by getting the information from place-to-place sooner than if you wait for the paper items to have to arrive.

Some General Guidelines:

To understand your legal rights and responsibilities regarding your EFT account, read the documents you receive from the financial institution issuing your card.  When they send you your personal identification number (PIN) keep that a secret from everyone except your most trusted confidants.  No one should know your PIN except you and select employees of the financial institution.

Also, before getting any EFT service make sure that you know how much protection you have against unauthorized transfers, the contact information for anyone who you have to report unauthorized activity to, fees and costs for the transfers you are allowed to make, how to stop payment if you need to, the steps you should take if you find something wrong on your statement or activity report, the duty the bank owes you if they don’t stop a transaction as you instructed and when the bank will give your confidential information to other third parties without your prior consent. Finally, retain your EFT receipts so that you can compare them with your periodic statements.  You do this for your checking account anyway, so the procedure should be entirely familiar.  By doing this you will be able to best protect yourself by discovering fraud and thereby limiting losses but you should also be able to use this information to help you make your best case in the event of a dispute.

Federal Rules:

The federal Electronic Fund Transfer Act (EFT Act) is one of the laws that covers electronic consumer transactions at the federal level.  Its goal is the fair and responsible management of the electronic commerce.  There are two major areas of concern for the consumer that the law applies to, incorrect information and lost or stolen cards.

Reporting Errors:

You have 60 days to notify your financial institution if there was a problem with your statement.  The best way to protect yourself if an error occurs is to notify the financial institution by certified letter, return receipt requested, so you can prove that the institution received your letter. Keep a copy of the letter for your records.  Make sure that you do this because if you fail to notify the institution of the error within 60 days the federal law releases the institution of any duty to investigate the matter for you.

As long as you tell the bank about the error it must begin to look into your statement in 10 days. Then the bank normally has 3 days after it is done to tell you what they found out.  If the institution needs more time it may take up to 45 days to complete the investigation - but only if the money in dispute is returned to your account and you're notified promptly of the credit.  Then when their done the bank must either give you the money or, if they say there is no error and decide to keep your cash, they must tell you in writing why they’re keeping your money. Commercial credit card issuers have 10 business days after you tell them about the error, or it can petition for up to 90 days, to complete an investigation. If no error is found at the end of the investigation, the institution must either give you back the money or give you a written explanation. Also keep in mind that some card issuers have their own warranty and purchaser protection periods.  Never forget to bend their ear because they are often quicker and more apt to hear.

Lost or Stolen ATM or Debit Cards:

Charges to your lost or stolen credit card cannot exceed $50. Theft or loss of an ATM or debit card can result in significant economic loss.  There are rules to follow or only the devil to pay, so listen up!

• You canot be held responsible for any unauthorized use of your. ATM or debit card if you report it is missing prior to its use.
• But if the unauthorized use occurs before you report it, the amount you can be held responsible for depends on when you report the loss to the card issuer.
• If you report the loss within two business days after you realize your card is missing loss is limited to $50.
• If you report its loss after two days but before 60 days after your statement is mailed to you your liability tops out at $500 for unauthorized transfers.
• If you fail to report an unauthorized transfer within 60 days after your statement is mailed to you, you risk unlimited loss. That means you could lose all the money in your account and the unused portion of your maximum line of credit established for overdrafts.
• The only way to avoid the operation of these time limits is if you can demonstrate some valid reason, like sickness or serious injury that stopped you from doing your duty under the rules.
• Also, state law or the contract can set lower liability limits for you and those lower limits will apply instead of those in the federal EFT Act.

Once you report the loss or theft of your ATM or debit card, you're no longer responsible for additional unauthorized transfers occurring after that time. Because these unauthorized transfers may appear on your statements, however, you should carefully review each statement you receive after you've reported the loss or theft. If the statement shows transfers that you did not make or that you need more information about, contact the institution immediately, using the special procedures provided for reporting errors as stated above. The ability to stop payment under the EFT Act is severely limited.  EFT transfers are designed to be as quick and as effective as cash sales so that it's up to you to resolve any problems you encounter with the seller and get your money back yourself.  You cannot stop payment in electronic funds transfer land except in cases where you’ve prearranged payment from your account and you let the institution know before they pay. Although federal law provides only limited rights to stop payment financial institutions or state laws may offer more rights.  Check into it and see if you can’t get what you need.
Finally, the EFT Act prohibits financial institutions from requiring you to repay a loan by electronic transfer and you have the right to choose your institution if you're required to receive your salary or government benefit check by EFT.

EFT Tips:

If you decide to use EFT:

• Take care of. Know where your ATM or debit card is at all times;
• if you lose your ATM or debit card it report it as soon as possible.
• Choose a PIN for your ATM or debit card that makes it difficult for a thief to use your card.
• Keep and compare your receipts for all types of EFT transactions with your periodic statements and report errors promptly.
• Make sure you know and trust a merchant before you share any bank account information or pre-authorize debits to your account.

But be forewarned that these rules do not go to all cases that are common today.  The act does not cover any prepaid balance cards, such as phone cards and many types of store gift cards and certificates we see around so much today.  While these may operate electronically they may not be covered by the act so that the rules designed to protect the consuming public may not be in effect.

Interest

The concepts credit and interest have been around at least as long as currency and banking and it is not too difficult to trace their development.

The Sumerians, who lived in the middle-east, have provided historians the first systematic records reflecting the accumulation of interest. And the concept of returning something more than exactly what was lent was observed by livestock owners who lent possession of some of their stock for extended periods.  The herd of livestock would naturally increase in population through their husbandry so that some gain from the loan of that property was expected by these ancient tribal herders.

So you can see the idea of interest was around at a time long before there was banking and financial institutions. But money matters were handled differently in those days, often by religious edict and royal decree.  At first it was against the law to receive anything more than the original sum when money was lent.  But as commerce grew and sums became greater there was more to be gained, and lost, so that the value of money in relation to time was discovered. Ancient merchants quickly learned the impact risks associated with loss of capital could have on profitability and pushed for changes in the rules that would allow them to protect themselves against loss and to take advantage of healthy economic conditions. And changes did come about.

During the rein of King Hammurabi, 18^th century BC, the first regulations of interest, debt and extension of credit were developed. Payments through a local banker by drafts written against deposit (early checks) were frequent, bonds owed were treated as negotiable and merchants began to make business loans bearing stated interest in precious metal or grain. So far, so good; this all makes sense- or does it?

In the cases where the seller himself does not wish to get involved in the financing of the sale there is a business opportunity for a third party lender.  Think of the car salesman we talked about before.  If the car salesman cannot afford to, or will not elect to, extend the buyer the $20,000 for five years then there is the opportunity for another lender, a bank, for instance, to step in to lend the buyer the needed capital. But why would a lender want to do this?  Pretend you have a lot of money; so much that you have more than you need and can lend to others if you wished to.

A borrower comes up to you and asks you for $20,000 today for a car and sincerely assures you he can pay it all back completely in five years.  The borrower has a good job and is an honest, reliable person. Would you lend them the money?  Of course not!  Absent some political reason for doing this you’d never take the future risk of the inability of the borrower to pay you everything back when all you’ll get is what you already have securely right now.

You need something extra, a reason to take the risk of parting with your wealth or else you will not be inclined to do it.  That extra ingredient is called interest.

More About Check 21

So now you know something about Check 21.  It is supposed to be a check-system improvement that allows checks to be processed faster.  What this means to you is that money may be deducted from your checking account faster than ever before.  So just take a moment before you go you to write that check.

First make certain that you have enough available funds in your financial institution to make good on the amount so you don’t have to put yourself through what can sometimes amount to what seems like nothing less than a world of hurt.  Word to the wise: just make sure that your checking account has enough money in it to cover the check.

What should you do if a banking institution turns you away because of an unfavorable report about your banking account? Let’s put this into perspective so the steps to take become clearer.  Your credit-worthiness is one of the most important parts of you character and reputation.

If you have a clean reputation for good living, humility and for paying your debts when they are due life will be a lot easier for you than if you are known for your hard living and short memory.  That’s just a natural fact.  Now think back to your younger days.  If your friends start coming up to and they say the people are spreading stories about you cheating or stealing or whatever, what is the first thing you do?  Well, assuming that the rumors are false, the normal reaction is probably to ask about the source of these stories so you can clear the air.

And that’s exactly what you want to do when someone is besmirching you sense of financial responsibility.  If you’re right and they’re wrong it is your duty to ask whoever is disrespecting your credit for the name, address and phone number of the company that furnished the report.  You might as well ask for the name of the service representative who reported you so you know just who to call or write.  And what do you say when they lend you their ear?  You need to request a copy of any document they have issued or that they have based their opinion on so that you have a fair chance to discover any incorrect data or important missing information. Under certain circumstances, such as if you're denied a new account at a financial institution, you are entitled to a free report. Otherwise, the most you can be charged under current rules is $9.What you ask for, how you make your demand and what you can expect to get may vary with who you are asking.

If your getting friendly fire from your own financial institution and it was the source of an error in your check report FCRA mandates that upon begin made aware of the mistake they promptly contact the check reporting agency so the record can be made good.  In addition, if you dispute the matter in writing and the check reporting company doesnot change the record to the way that you like it you get to add a written statement to your report that tells about how you think things should be and why.

If you do this and find out that it isn’t enough to get the job done and you know that you are in the right you can follow-up with a report to the federal regulator and to the a banking agency stating the details of the dispute and asking for relief.

If, on the other hand, the problem arises from the check reporting service then contacting the Federal Trade Commission and detailing the issues involved will be the best way to seek redress.

There are also any variety of services who will offer to help counsel and advise you in these matters.  Use your better judgment when looking into these.  Some may be reputable, but steer clear of those who populate the dimly lit ways between truth and fiction.  After all, you don’t what to get credit counseling just to end up with more problems! There are some ways to avoid the unwanted publicity of overdrafts that may vary with your bank.  Yu should see if your bank offers these and then take advantage while it lasts!See if you can link your checking account to a savings account you have with the bank. If you overdraw your checking account, the bank can transfer funds from your savings account to your checking account.  If you did not think of this before either because you did not have savings and checking accounts at your bank or because you just didn’t think of it worry, it may not be too late.  Ask your bank making such  a plan and about any transfer fees the next time you have the chance.  You may be glad that you did.

You can also try to set up an overdraft line of credit with your current bank.  Just apply for a  floating line of credit in the same way you would apply for a regular loan.  That way if you overdraw your account your bank can back you up by lending you the funds you need to hold you over.Just remember that you will pay interest on this loan, and that there may be an annual fee, too. But you should look into this and compare the costs to those of an overdraft-protection plan.

Then again why not be creative and just link your account to your bank’s credit card?  Think about it,  if you link your account to a credit card, any overdraft amount becomes a cash advance on your credit card. The cost of this option depends on the interest rate on your credit card and how long you take to pay back the advance- but it could prove to be your best choice!.Some things you should keep in mind about these ways to cover you checking activity is that they are generally costly forms of credit and that there is no guarantee that your bank will cover your checks even if you have one of these plans  A hard and fast rule is that if you overdraw your account, you should try to get the funds needed to cover your check back into your account as soon as possible. Remember that you need to put enough money back into your account to cover both the amount of your overdraft and any bank fees.

There are a few other tips to follow if you want to avoid the prickly pear of checking account inconsistencies:

• Frequently balance and monitor your checking account
• Donot close one checking account before you have established another one
• Make sure any outstanding checks have cleared before closing your account
• Make sure all account fees have been paid before closing your account

Saving Money

I think that the facts, past and present, clearly demonstrate that ours is inherently NOT a society of savers.  We can easily conjure images of country-western living of 100 years ago or more and clearly visualize cozy households adorably accented by the trappings of the period.

The only thing is that we now know that many of the items we see in that image were purchased and that the purchase was likely done over time and on credit! Leveraging debt has been a feature of the American character form the very earliest days and continues to remain a key part of American culture.  But there have always been voices of dissent.  And although they grew ever weaker until their silence, they are worth a brief mention. Thrift and frugality were thought by some to be among the most important virtues to cultivate.  Some even took an almost pious perspective to the idea of thrift and saving in their belief that careless spending and needless consumption were gluttony and were therefore sinful.

In 1849 one commentator wrote of those who shopped at thrift stores in order to save on certain purchases “These establishments are much frequented by economical housekeepers afflicted with that most melancholy of all distempers, a mania for cheap bargains; and many a dollar is paid for ‘cheap' articles which, in a few weeks, become utterly and irrecoverably useless, while the deluded purchaser is congratulating herself upon the excellent bargain she has made.” The problem that these critics faced was their own hypocrisy.  Period statistics demonstrate that while a large percentage of Americans did believe that it was wise and good to be thrifty it was also found that they admitted to being less than candid regarding their financial affairs and particularly their level of indebtedness.

In fact, a census undertaken in the late 1900’s in inquiry of this very topic had, after a brief inauguration, to be cancelled entirely as it was found that targeted respondents were frequently prone to lose patience with survey takers who hazarded into this area of investigation.  And nothing that followed ever came close to slowing, satisfying or replacing the American passion for continuous spending.

Post-WW I American society is largely characterized by the peoples’ desire to spend freely and to “live-it-up”.  Published journalists of the time articulated this sentiment, declaring that that, “thrift was un-American.”  The end of the Second World War saw consumerism reach theretofore unthinkable proportions.  People were just more eager to enjoy life while they could rather than to assume everything would be all right in 20 or 30 years. Most every American today is familiar with the idea of thrift and many believe that it is a morally admirable virtue.

Occasional articles in the financial pages even point out how certain levels of saving can be maintain the health of a nation’s economy.  Yet I would bet that most see the concept of thrift in the context of the value resulting from a good deal and would characterize the idea of saving for it own sake as old fashioned and out of date.

Check 21

Have you been caught by Check 21?  You might not yet, but you probably will have a tangle with it soon.

It is very frustrating to have your checks clearing (cashing), as fast as you write them.  Your entire routine of being able to write a check, knowing that it wouldn’t clear (or be cashed) for a few days is a thing of the past.  Boy, has Check 21 ruined your life.

No need to worry.  Many others, just like you are in the same situation with Check 21.  Here are some choices:

You can get another credit card to charge the things you need until your cash is in your account.  This credit card can help float you through this tough time.  Click here if you are interested in getting another credit card.

You could get a quick payday loan.  A payday loan will get you money fast.  You will have the cash you need to pay the bills today.  Then when your real paycheck gets to your account you will already have things under control.

If you have gotten in trouble with Check 21, you have some options.  You probably need just a little bit of cash to get you through a very tight spot.

Fact:

What is Check 21?

 Check 21 (or Check Clearing for the 21^st Century Act) is a federal law.  This law went into effect on October 28, 2004.  The law was developed to help increase the efficiency of the United States check clearing system.  It allows banks to replace an original check with a “substitute check”.  Banks are now allowed to accept these “substitute checks” as if they were the original check.  In simple terms, your checks will be cleared (cashed) much sooner than they have in the past.  In many cases, the very day you write the check.

Early Sources of Credit

Before organized consumer credit, there were five major lending sources: pawnbrokers, illegal small-loan lenders, retailers, friends and family, and mortgage lenders. Indebtedness has always been common but there was no need to closely keep track of it and report it like today. Merchants just kept the figures on tabs or in their memories.

But someone somewhere wanted to start keeping track of this information because consumer debt was estimated as $1,500,000,000 in 1858 and it rose to 11,000,000,000,000 in 1890.  In 1890 average household debt was about twice the annual income!  Compare this to 1998, where average family debt and income were about equal and you will see that, incredibly, credit meant even more to our forefathers than it means to us here in the U.S. today. The amount of lending was high from the very beginning of American freedom and only continued to rise in dollar amount levels that are nothing less than astronomical today.  Now look back to the list of places where you could get credit from. Because of the bloating of credit lending by family and neighbors began to fade away.

Soon only the local pawnbroker and finance companies remained and they became the undisputed heavyweight champions of the credit world. Pawning has an interesting history.  It was started by Italian Franciscans in 1462.  They began, surprisingly enough, as beneficent institutions that were there to help the poor, struggling paisano peasant to obtain small loans that let the person use their personal property as assurance against the debt.

Pawning was very common throughout the western world by the time the colonies broke loose from British imperial wrath and was actually considered a respectable trade until rather recently. Typical items that were placed on deposit in exchange for cash were clothing, jewelry, bedding, musical instruments, clocks, tools, guns and furniture.  Excepting for some modern electrical items these you can see many of these same items in pawn shops today.

Very Early Debt

History has shown the presence of a slow but strong movement toward helping to reach higher levels of commercial activity. All the steps so far mentioned have had the effect of making trade easier to conduct and have supported increased amounts of trading. Debt, the result of borrowing, is a strong force that supports the growth of business and commerce by giving merchants and buyers easier access to the wealth they need to get things done.But, just like with credit, the idea of the use of debt for commercial growth had to gain acceptance.  In the earliest times debt was used primarily for motivation and for control.  If farmers were not able to pay the full amount of their seasonal taxes to the lord or the land there would be penalties levied that would be impossible by today’s standards.  It was not uncommon for the aggravated lord for the have his way at the reigns with family members of his choice as the lowly debtor looked on or averted his gaze, in deference to his lordship. This was the fair and just penalty for such a crime in the medieval times. I think you can understand that this made the head of the household on these downtrodden farms really strive with all their might to make sure that the season’s harvest reached the necessary goal.

With this kind of history it is not hard to see why credit was met with cautious curiosity by many.  After all, it looked to many like a widening chasm come to devour the integrity of family and to further erode the self esteem of the already disenfranchised common classes.

Money, Credit and Interest

Credit and debt started with the landing of the Pilgrims.  The Pilgrims backed by fancy London financiers who extended them credit to be paid in quarterly installments. Meeting these obligations was going to be tough, though.  The pilgrims were coming to a new place; a place whose bounty was not known with certainty and a place that had no money.  You can easily imagine that any amounts the Pilgrims had brought with them would soon run out- then what?  Well it is fair to assume that they’d thought of this too and that they knew their payments would have to continue anyway.  So it is fair to assume that they were banking on the wealth they would find in the New World to sustain them and to help them pay their debt.Since the small sums of money were soon exhausted it is clear to see that barter was, for the most part, the way that trade was conducted.

Things began to get better for the Pilgrims and it became clear that some sort of money would be needed to help in growth and commerce.Just as in ancient times, there was not currency so that the Pilgrims were left to their own devices.  As in other times and in other places they wanted to use something easy to carry, to divide, that had value, and that would last through repeated use.

They did not have the advantage of vast, easily accessible mineral stores as was did many of the civilizations that grew up about the middle east and the Mediterranean so they could not employ precious metals for coinage.Instead, they resorted to the use of a currency they called “wampum.  “Wampum was usually made from a hard-shell clam and had been popular as early as 1620 when the Dutch used it to trade with the New York Indian Tribes.  Other Indians in the area preferred to beads as their circulating medium of exchange.

Settlers came to use any means of exchange the Indians used, first in their trade with the Indians and then for trade among themselves.The widespread use and acceptance of these native currencies were evident in Massachusetts, where in1641 Harvard College accepted wampum as payment for tuition or for tax payments and in New York, where wampum as an official currency as late as in 1701.

Then, there was a long period of growing prosperity in America that was mirrored by ravenous increases in taxes levied by Crown.  The colonial discontent that followed resulted in the Revolutionary war.The American Revolution presents an interesting case study for the larger issues that govern credit.  These very same principles guide credit affairs in the consumer realm.

The Commercial Culture

While bartering was a very clear and easy-to-see way of dealing, it was fairly rigid in the structure and in the types of arrangements people could make with one another.  You could, or more properly would, only trade for what was “at the table”.  You traded your grain because you needed a goose, and the man with a goose, he needed your grain.  And the deal was done at that time because the one needed the grain, and the other a goose, right then.This kept trading rather limited in the context of time.  It helped if you could time your acquisition.  If you could trade for needed livestock or produce exactly as you needed them and just as your items were at their peak value then everything would be perfect.

It was issues like these that were the reasons for the appearance and popular acceptance of money.  The characteristics people were looking for in developing a currency was that it be: Something that people wanted.  Precious metals fit this description.  They are fairly compact ant easy to carry and conceal.  Gold and silver are the most popular metals for currency but nickel, copper, brass and alloys are also used.It was also desirable that the money come in different denominations, or amounts.  Merchants and buyers often needed “change” when the agreed upon bargain failed to fit squarely at the currency amount.  This is another advantage a money market system has over a barter system.

Livestock are indivisible and this could make bargaining very difficult- especially between two people trying to exchange things that could not be broken up into smaller parts and retain their integrity.  Imagine if you will the problem posed by one bartering partner with a horse who wants to trade with another for poultry and the deal that folks in the community find to be fair and acceptable is 100 chickens per horse.What will the man with the horse do if the chicken farmer has only 89 birds?  He cannot “remove” 11% of his animal to make the deal even out.  He must be resigned to take the loss or find some kind of substitution-11 ducks, perhaps; even if he doesn’t want any substitutions.

In the earliest days of coined currency it was common practice to cut coins into pieces, or “bits”, to get exact amounts.  Another feature those who issue minted money want is that it lat a long time.  This also points to the advantage of metal coinage.  It need not be cared for to or from market, as would livestock, fish or produce.We know that it was long ago that merchants who lived far apart traded with frequency and that trade between villages, nations and even continents was going on hundreds, if not thousands, of years ago.  Money is a convenient way for people to exchange the value of their labor and to accumulate wealth that would not go bad or spoil.  And this suggests the reason for money and its evolution.

Distant merchants liked money made from precious metals, like silver and gold, because everybody everywhere likes them.  This means the buyer and seller don’t have to worry so much about whether or not the places they go will take their money and this is important.  Every one of us has times where we have had something of value to trade that nobody else liked.  Think of the grammar school kid at lunch time that wants to trade his peanut butter and jelly sandwich.  The sandwich has value, but nobody ever takes it in trade.This is the problem many merchants wanted to avoid with local currencies in the olden days.  They used precious metals because silver and gold are like dessert, everybody want s them.  But gold and silver are heavy and hard to transport in large amounts over great distances and so paper money was developed to try to overcome these problems.  As banking got bigger and better so that they could be found everywhere checks were used as another way to quickly and easily exchange value.

People needed an easy way to transport their wealth so they could make their deals. As trade picked up in the amounts of money involved between merchantsMoney provided, where ever it was accepted, some way of trading different things at different times.  It also made it easier to transport one’s worth so they had a broader scope of selection.  And though it would still be some time before people would be choosing between different household appliances or automobiles the basic framework for the way things are today was being established.

With money came the need for accurate counting and there is evidence of accounting recordings that date back nearly 10,000 years.  Reliable counting methods and accurate records keeping helped to make money become a really useful trading tool.  Flanked by these powerful allies the money lender could use money in the same way the farmer uses his plough or the skilled craftsman his trusty chisel.

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