Deposit

When you put money into a bank account, you are making a deposit. Legally, the money becomes the bank's to use, and the bank owes you the same amount. That is why deposits appear as liabilities on a bank's balance sheet.

Banks use deposits to fund their lending. They keep a portion as reserves and lend most of the rest to borrowers, earning more interest on the loans than they pay depositors.

Deposits come in different forms. Demand deposits, such as current accounts, can be withdrawn at any time. Time deposits, such as fixed-term savings, are locked up for an agreed period in exchange for a higher interest rate.

For example, if you deposit 2,000 in a savings account paying 3% a year, you earn about 60 in interest over a year, while the bank can use the money to make loans.

In many countries, deposits are protected up to a set limit by deposit insurance, which repays customers if a bank fails. This protection is a major reason people trust banks with their money.