When it involves saving money till such a time that it should be used, most people prefer placing their hard earned money in banks. Except if you work in the banking field, you may have wondered exactly how it is that banks are able to exploit the cash that you saved. To explain this, you will need to know the way dollars “travel”: from your fingers, to the accurate bill counter machine, to the bank's depository, and even outside bank walls.
The journey begins with you. After a month of hard work, you finally get your hands on your salary. A big chunk of it is expended on daily essentials like food. What happens to the untouched money? For security, you opted to save it. And so, you head to your dependable bank and hand it to the bank clerk along with the deposit slip.
The teller then counts the cash through a bill counter equipment. In the past, before such helpful machines was invented, transacting in a bank was quite an inconvenience. Now, you can be assured of a more correct count of your bills when depositing or withdrawing an amount, thanks to counting machineries. Some of the more cutting-edge machines are prepped with ultraviolet or magnetic sensors to detect counterfeit dollars.
In the bank, your cash is combined with that of the other clients'. However, your bank still maintains an accurate copy of your account details. You will have logs of your withdrawals, check encashment, and other transactions. All of which are confidential, of course.
To make profit, the bank grants financing to others, consequently becoming lenders. They earn through the interest they charge. Now, the amount that can be loaned is highly governed by the government, more precisely the Federal Reserve. And the money that was loaned re-enters the community (by means of investing in items and/or being deposited to other banks), which rouses the economic system. Rest assured that in this cycle, your real bills are securely carried from one financial institution to another using Federal Reserve approved night deposit bags, also known as tamper-evident bags.
Understanding what happens to the cash you deposit may give you a greater view and respect of banking institutions. To discover more, browse through money.howstuffworks.com/personal-finance/banking/bank1.htm
Of How Cash Moves From Bill Counter Machine to Storage