Often called a transfer for short, a book transfer happens when a financial instrument is transferred from one owner or account to another without physically moving the paper financial instrument. Though a book transfer can be used to transfer securities like bonds, most people deal with book transfers when they move money from one bank account to another, like when an account holder transfers funds from a savings account to a checking account. A book transfer can be performed in person, through contact between a customer and a bank representative, or it can be arranged electronically through online banking services. Online book transfers can often be scheduled for automatic transfer.
Generally, book transfers are convenient and profitable for the bank because they are immediate, erasing the uncertainty and float time in check transactions. Float time is the time between when the check was written and when the check was debited from the account of the person who issued the check. A check is a paper promise to allow a person or company to debit a specific amount from the check issuer's account, sometimes on a future date. When a check is issued for a time in the future, it is called a post-dated check. Using a book transfer is convenient for banking customers because book transfer transactions do not require a paper exchange or a trip to the bank to complete.
Book transfers usually refer to transactions that occur within the same bank, for example, if a customer transfers money to another customer at the same bank. Usually, the term "book transfer" is used more loosely to refer to any transfer transaction in which paperwork or physical goods are not exchanged. These transactions can include electronic check transactions or transfers of bonds and other securities. Most securities transfers are done without paper or physical delivery, so many securities transactions are considered to be book transfers.
Securities that can be exchanged in a book transfer include bonds, preferred stock, and common stock. A bond is essentially a loan to a corporation with the promise of steady interest payments and repayment scheduled on designated dates. Common stock is the stock traded on the stock market. With common stock, small parts of company ownership called stock are traded for profit. Preferred stock is a lesser-used type of stock that pays interest like a bond and has the privilege of receiving stock dividend payments first, before common stock owners are paid.