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
Long story short: no, your account balance does not represent real-world cash. In fact, if everyone tried to withdraw their balance all at once, banks would go broke before even like half of them were completed (see: [bank runs](https://en.m.wikipedia.org/wiki/Bank_run)). So, when an online purchase happens, the banks don’t need to transfer money around; they both just need to change the numbers in the relative accounts. Of course, there are checks to make sure people don’t change numbers without valid transactions, but for the most part bank accounts do not represent bank funds.
Latest Answers