eli5: do banks pay you for saving your money with them or do you pay them to save your money?

Question

I never learned how it works

In: 3

Answer 1

Banks reward you with pennies for letting them use your cold, hard earned cash, to virtually create money out of thin air.

With fractional-reserve banking, they take your deposit and loan it to customer #2, who puts it in a bank account, whence it is loaned to customer #3, and so on.

The estimate is that with this system, banks create up to 10 times more money than there is to begin with.

This is why, when everyone asks to withdraw their account at the same time, the banks cannot meet the request. Ninety percent of that money only exist thanks to fractional reserve banking.