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FDIC Learning Bank Carmen Centswhat

What Does a Bank Do With My Money?

Picture of a person holding the door open to a Bank vaultWhen a person deposits money in a bank, the bank pays that person for the use of their money. The additional money paid by the bank is called interest. In order to have enough money to pay interest to its depositors, a bank must earn income. How does a bank do this?

A bank collects money from people or businesses that want to keep their money in a safe place. These people are known as savers. The bank then lends this money to people or businesses that require additional money to meet their current or future needs.

So, when you deposit money at your local bank, the money does not remain locked away in the bank vault. Instead, the bank lends your money to others in your local community. Whether it is to assist your parents in the purchase of your home or to help your neighbor start his own business, these loans benefit your entire community.

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Last Updated 1/2/2014 learning@fdic.gov