Some Interesting Banking Info

In today’s economy it seems as though we have to make every penny count. More so we need to make an extra dollar if we can. Lately I have noticed that the banks have high interest checking accounts. Yes it is true you can get a checking account that will pay interest and a higher interest than some others you might find.

In trying to figure out why they would do this I found that they do this to offer an incentive to the customer by providing a higher interest rate on checking and savings accounts. This benefits current customers and entices new customers in the door and open accounts. This is a good idea on the banks part because the banking industry has become so competitive in today’s market.

So back to high interest bank accounts, free checking and how they can provide this to the new or existing customers of the bank.

I will try to make this easy to follow and simple to understand.

“Banks create money in the economy by providing loans. The reserve requirement is currently 3 percent to 10 percent of a bank’s total deposits.”

Put simply, say you deposit $100 into your bank and at this time the Federal Reserve has a ten percent requirement – the bank can now lend $90 to someone else. If the person who gets the loan put that money into a bank account in another bank, now that other bank can loan out $81. If you multiply those simple figures by thousands of people and lots of banks you can imagine the amount of money banking is introducing into the economy.

Instead of keeping the money as cash reserves for themselves, which banks can do legally, because of competition between banks now they use the money created from lending and offer incentives. Things like higher interest checking accounts and free checking accounts help to draw in more customers to a bank, bringing them money that they can lend from.

But as with every good thing, one may ask, what’s the catch? There’s always a catch to every good thing. There is normally no “catch” other than a few rules or stipulations, some of them may include the amount of withdrawals and how often you can make them, there may be a penalty for too many withdrawals or being under a certain balance. So make sure you are educated and ask as many questions as you possibly can in order to make the right choices on the right account for you.

I hope this little tidbit of information was helpful for you, I thought it was fun to look into and check out. In the state of our economy, I thought I would share this because it seem as though we are all in the same boat.

As with any money and investment ideas you are in control of your money, always make sure to read and find out the rules and stipulations that may come with any offers you may receive financially.