What happens with the money in your account

AngieIntroducing Mr. X, who comes to the bank for a loan to buy a car.  He’s a good customer because he watches his money carefully. The bank is sure he’ll repay his loan, and they give him one. Mr. X is a happy customer!

Money and car loan document delivered to Mr. X

AngieYour money — and money from lots of other bank customers — gets paid to Mr. X in the form of a car loan. If anyone has ever given you a loan, chances are you repaid them what you owed them, right? Well, maybe…. But when banks lend you money, you have to repay them with even more money. Mr. X will have to pay every penny back — plus he’ll have to pay interest.

There’s that word interest again. That’s right — interest works both ways. You earn it if you’re saving money, and you pay it if you’re borrowing money.

So Mr. X now pays the car dealer for his new car. On his way home, Mr. X fills up the tank at the gas station, and then buys some car supplies.

Car and gas station and supply signs

AngieWith each purchase, Mr. X’s money changes hands once again. The gasoline and car supply merchants use Mr. X’s money to pay their expenses and their workers’ paychecks. And then, of course, everyone takes their money — once again — back to the bank. Mr. X’s money has gone full circle!

Click the Next button to learn about banks and you.