When you buy something online or with a credit card, what happens to the physical money that the transaction represents? Are there just trucks of money being carted around to different banks? Does the number I see on my bank about even represent real, physical cash?
In: Economics
When you use a credit card, you are creating currency. The bank honors the payment to the retailer, while your bank account balance stays the same. When you pay off your credit card, you are destroying the currency that you created.
In a sense, the bank is issuing a loan to the retailer and you’re paying back the loan when you settle your credit card bill.
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