Brilliant blog post by a colleague:
http://blog.bitinstant.com/blog/2012/10/...rency.html

We learned that already at school, in the 80s: You create money by taking a loan, and you destroy money by putting it into the bank (the bank's job is to balance those out).

This post was last modified: 10-19-2012 05:35 PM by Shnoing.

I think Thomas81 made a similar point when he posted all his stuff about eliminating scarcity.  'Course, his other stuff about turning each separate industry into its own monopoly did not convince me.

The reason to hold your money with a bank is that you should be able to trust them to take care of it for you, are regulated, give you a modest return, and give it back to you when you ask for it.

These days banks are run so responsibly that you are probably better off using bitcoin.

What's ironic is that if you have a smaller amount of money, the bank charges you more to hold onto it.  Now what kind of sense does that make?  That's why I use federal credit unions; most of their services are free, including free checking.  Of course, different credit unions are different, so it still pays to shop around, but I've used two different ones where I get free checking, and from having the checking account I am allowed to open a savings account that earns a small amount of interest.  Not enough to matter, of course, but...it's the thought that counts?  No, no; it's the fact that it's free.  THAT's what I like about it.

Most UK banks offer free accounts, but in general that's doing you a favour - it's not something they're required to do.

Often, the bank will use the money you deposit to invest, that's how they make a profit and it's where your interest comes from - so it would make sense that smaller amounts which can't be invested would cost more.

Trust me when I say that most of the regulations seem intended to prevent you moving your own money around.

For example, there's no regulations at all covering security.

...You have to pay for an account in the US?

Over here, you get a free account, free cards (plus free replacements), free withdrawals, free checking, and free online banking as a matter of course. No bank fees for...pretty much anything, except going over an overdraft limit. You can get a paid account, but they usually have massive incentives to do so - my dad gets free unlimited travel insurance for himself and anybody with him, for example.

Some accounts have "monthly fees"  so we were surprised on day to receive a letter from the bank about an account that we seldom used (being that the branch moved too far away and no machines handy).  They had removed fees every month until the balance was zero.  So it they wanted our business then we would tell them to restore our balance and stop charging us every month for services that we were not using.  So many banks lose customers for charging these outrageous fees.

Too many poor people in North America are resorting to using cheque cashing businesses and "pay day" loans.  Banks in poorer communities (also Indian reserves) will close their bank branches.  People are just cashing cheques and not using services such as mortgages, business loans, retirement funds.  So the banks are not making as much profit as in other places.  

Many government branches are wanting to eliminate issuing paper cheques and want people to have direct deposit (electronic transfer) only some poor people just find that using a bank to keep their money is just costing them too much.  They will get evicted because their monthly service charge is deducted and their rent cheque bounces.

There would be minimum cash reserve requirements for UK banks - which, contrary to popular belief, provides almost no security at all to the depositor.

Asian banks that I have worked at have been very heavily regulated, to the extent that they seem to spend much of their effort getting around those regulations. There are fairly strict consumer credit regulations in Australia and the banks do actually follow the rules in my experience.

Banks used to give people a false sense of security. Not so much nowadays, most people still don't know much about banking but they at least understand that the banks are a lot shakier and less solid than they pretend to be.

The majority of deposit accounts cost a bank significantly more to administer (even when fees are taken into consideration) than the bank can lend on the margins it gets for lending that money back out. Bank fees are a way of discouraging people with minimal savings from using the bank's services.