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The problem is that the incentives are exactly reversed. Banks limit your credit because they don't want to lose their money. Sports betting/casinos/etc want yo
by khuey 1y ago
The problem is that the incentives are exactly reversed. Banks limit your credit because they don't want to lose their money. Sports betting/casinos/etc want you to place bigger bets because they want you to lose your money.
- gchamonlive 1y agoI agree, banks have in their best interest that they don't loose money and bet houses have in their best interest that you lose yours. So if there aren't any natural incentives you just make up artificial ones. One such mechanism is regulation, just like with the tobacco industry.
- charcircuit 1y agoIt's the same for casinos. If you buy $50k of chips, lose them to someone else in poker and they redeem them. If your $50k purchases bounces the casino loses money.
- kqr 1y agoWait whose money do you think is in the bank? Banks are funded by depositors' money and they absolutely play fast and loose with it when not regulated.
- MyOutfitIsVague 1y agoThe conversation is credit cards, in which case you are absolutely paying with the bank's money, and if you don't pay it back (particularly if you can't and declare bankruptcy), they lose their money.
- mattclarkdotnet 1y agoThat is not true at all. Banks are not funded by depositors money. Banks create money when they make loans, and destroy money when loans are repaid. Deposits in current accounts are liabilities from the bank’s point of view.
- kgwgk 1y ago> Banks are not funded by depositors money. […] Deposits in current accounts are liabilities from the bank’s point of view. “Banks are funded with deposits” = “Deposits are liabilities for banks”
- throwaway-0001 1y agoJust to e clear is net 0. Not just liability. —— Yes, deposits in current accounts are *liabilities* from a bank's point of view. This may seem counterintuitive, as we typically think of deposits as the bank's money. However, in accounting terms, a liability is something a business owes to others. ### The Bank Owes You Your Money When you deposit money into a current account, you are essentially lending that money to the bank. The bank has an obligation to return these funds to you whenever you demand them, whether by withdrawing cash from an ATM, writing a check, or making an electronic payment. This obligation to repay the depositor is what makes the deposit a liability for the bank. ### How it Works on a Bank's Balance Sheet A bank's financial health is represented by its balance sheet, which must always balance. The basic accounting equation is: $$Assets = Liabilities + Equity$$ Here's a simplified breakdown of how your deposit fits in: * *Liabilities:* Your current account deposit is recorded on the liability side of the bank's balance sheet. It represents a debt the bank owes to you. Other liabilities for a bank include savings account deposits, certificates of deposit (CDs), and money borrowed from other financial institutions. * *Assets:* When you deposit cash, the bank's cash holdings (an asset) increase. The bank then uses the funds from your deposit to generate income by making loans to other customers or by investing in securities. These loans and investments are considered assets for the bank because they represent money that is owed to the bank. *In essence, the bank takes on a liability (your deposit) and creates an asset (a loan or investment).* The bank's profit comes from the difference between the interest it earns on its assets (e.g., the interest rate on a loan) and the interest it pays on its liabilities (e.g., the interest paid on a savings account, though current accounts often have very low or no interest). Therefore, from the bank's perspective, the money you have in your current account is not its own money but rather a debt it must be prepared to repay at any time.