Hoping it is kept safe When you deposit money in the bank Do you think there is money waiting for you there without moving?

If your answer “Yes!” You are wrong. Because your savings are not actually waiting for you. Banks actually earn money every day from your savings. creates new money!

“But how?” If so, let’s start with the basics. The interest you earn on the money you deposit in the bank is a kind of payment for your services!

“What service? Am I not the one receiving the service? The question may have crossed your mind.

Let us explain it simply. If after depositing money at the bank you put this money in a deposit account, you actually receive an amount in return for the promise that you will not receive that money for a certain period of time. You are entitled to interest.

Why does the bank pay this interest? Simply put, it is the accumulation that you have not touched yet. for giving honor to others!

Banks give money that their customers entrust to individuals or companies to others who need a loan at a higher interest rate than they give to you. as debt They give.

Banks’ profits are based on the with interest from loans It comes from the difference between the interest they pay you.

Of course, they cannot do this alone. There are some legal limits.

First, banks want to make more loans and make more money. attract more deposits must.

Because no matter how many deposit accounts the bank has, There are so many cash reserves resources. Therefore, deposits create loans.

But this is not unlimited. Banks keep part of their deposits must keep it in reserve.

Assuming this rate is 10%, for example, the bank has a deposit of 10,000 lira. He can give 9,000 lira as a loan.

Banks increase the amount of cash circulating within the institution, both your money and the loans they make.

Let’s say 9,000 lira of your 10,000 lira as credit is given.

In this case your account is still valid There is 10,000 lira. The customer who applies for a loan has 9,000 lira in his account.

In this case, thanks to your deposit of 10,000 lira, the money circulates within the bank An amount of 19,000 lira was generated.

When this customer, who has received a loan, pays back 9,000 lira with interest, the bank will keep part of it as a reserve and lend out the rest. The cycle will continue like this.

This is how banks can use your money without increasing the amount of physical cash. They increase the amount of money in circulation.

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