A scheme developed by many of the major commercial banks which can benefit both bank and customers. It is based upon the fact that most people are faced with large payments, e.g. for rates, electricity, gas, telephone, etc., which, though they cover an extended period, have to be made at one specific time. A budget account is a separate account at the bank, with a separate cheque book, into which monthly fixed sums are paid which will, when added together, produce the total of the various payments anticipated. The load is thereby spread evenly over the year, to avoid the necessity of finding large amounts of money at particular, and perhaps inconvenient. dates.
There is usually a fixed charge for the service, plus interest on amounts overdrawn.
Many businesses, although not specifically operating budget accounts, do much the same thing, and arrange for the payment of rates or electricity charges, etc., in monthly parts by standing orders given to the bank - but only with the agreement of the creditor.
|Reference: The Penguin Business Dictionary, 3rd edt.|