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What does the bank do with the money I keep in my checking account?

Deposits are accepted by the banking system, which then lends the cash to others. The interest gained on the loans, as well as the fees imposed on depositors, are a source of income for them. This doesn’t mean that you won’t have access to your funds when you need them. They can simply “draw” from your existing amount in order to lend to others (rather than taking the money itself). Savings, certificates of deposit, and money market accounts are the most common types of interest-bearing accounts.

Money sitting in an account is useless to a financial institution, therefore it will be lent to others or used for other profitable purposes. In most countries, laws and Central Bank liquidity and provisioning requirements protect the value and accessibility of your deposit.

Deposited funds (yours and everyone else’s) are just electronic entries. For them, everything is only an electronic balance sheet transfer until a large number of depositors demand that their money be paid out in cash (called a “run”).

Banks utilize the money that consumers deposit to invest in high-risk, high-interest businesses. This brings in money for the bank, part of which is repaid to customers in the form of savings interest.

Putting your money in a bank account not only gives you interest, but it also protects you against fire and theft since your deposit is guaranteed up to $250,000 per account by the Federal Deposit Insurance Corporation (FDIC). If your bank fails, the FDIC will reimburse you for the money in your checking and savings accounts, but not for the contents of your safe deposit box. You can secure your valuables from fire and robbery by keeping them in a safe deposit box. Hope that kinda answers your question.

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