2. What do Banks do?

Different types of Bank accounts

  • Current account (checking account in the US) This bank account enables easy and quick access to money. A customer can withdraw the money at a moment’s notice and will have features, such as debit card and cash points. The interest rate on current account tends to be very low because the bank needs to keep sufficient liquidity to meet the demand of customers to withdraw.
  • Savings account (time deposit account) Savings accounts typically have limits on the amount of money that can be withdrawn at once. Often banks require a certain notice of (e.g. seven days) to pay money requested. This enables banks to pay a higher interest rate as the bank needs less liquidity.

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