The Pros And Cons Of Interest Rates In Banking

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To begin, banks are a place to deposit money. Most people think of banks like a safe storage locker. If a person deposits their paycheck into a bank they have the guarantee of their money being there next time they check their account, that is if they choose to not spend it. Without banks, consumers would be forced to hide their money in their homes and under mattresses. That is just impractical and poses many major risks. Banks are a much safer alternative. Banks also offer interest rates. Interest rates help consumers not lose money while it sits in the bank. Interest rates fight inflation. According to Tejvan Pettinger, “for current accounts, interest rates could be very low, but for a savings account, the interest rate could be significant” (Pettinger). Generally, this is because savings accounts hold more money than a checking account. An important factor in banking is interest rates and with interest rates comes inflation. According to Jean Folger, “Inflation refers to the rate at which prices for goods and services rises. In the United States, interest rates are determined by the Federal Reserve” (Folger). Inflation and interest rates are inversely related to banking. This means if interest rates are low, inflation will rise. This is because while interest rates are low people will be more likely to borrow money and this results in the people spending more money causing the economy to expand. When the economy grows inflation rises. If interest rates are higher this
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