It is very important for the economy that banks keep people’s money safe and is available when they need it. Most people borrow money from a bank to purchase a home or start a business. Many use bank-issued credit cards and have other loans to make home improvements or buy a car. Some of the bank’s money comes from investors who own shares of stock in the bank holding company. Most of the money they lend to borrowers comes from deposits from the bank’s customers. The bank pays them interest for their deposits and then lends out the surplus money at a higher rate of interest to borrowers.

Banks have a good idea of how much float or available cash they need to have on hand each week. People do not need to withdraw all of their cash at once and are sometimes encouraged to make longer-term commitments by receiving higher interest rates in things like certificates of deposit. To help protect the banking system, the government has lots of rules about financial ratios that banks must maintain and rules about what assets can be invested in. Banks also contribute fees to provide FDIC insurance for bank accounts up to $250,000.

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