• utiandtheblowfish@lemmy.world
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      1 year ago

      Banks use your money to invest. They only have to have a small percentage of their holdings in cash on hand so they can invest, make money, and pay you interest.

      Your money isn’t just sitting in a vault at your local Bank of America branch.

    • lotanis@discuss.tchncs.de
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      1 year ago

      Exactly. And that’s why banks pay you to give it to them instead.

      Banks provide a valuable function to society that works in on two sides: There’s a group of people who want to keep their money safe There’s a group of people that need a loan to get started in a business that will then make money and improve society

      The bank takes all the money that has been deposited and makes the loan, charging interest. It then pays the depositors (less) interest to incentivise them to put money in the bank (instead of under the mattress).

      In order for society to advance and grow you need a source of finance to get things off the ground. Anything from small businesses to massive infrastructure projects. Banks help facilitate that.