I was told by an economics teacher once that banks take advantage of the weekend being closed to deposit on hand cash in foreign banks, specifically Mexican and South American banks. The lending bank would then receive high interest rate for that short period of time but their funds were unsecured. The primary reason they do this was that banks could make a higher yield than what they pay out themselves. The teacher made it sound like this is a common practice but I'm having trouble finding information about it.
closed as off-topic by Chris W. Rea, Nathan L, JoeTaxpayer♦ Jun 25 '15 at 20:37
This question appears to be off-topic. The users who voted to close gave this specific reason:
- "Questions on economics are off-topic unless they relate directly to personal finance." – Chris W. Rea, Nathan L, JoeTaxpayer
Most of your money doesn't exist as physical cash, but simply as numbers in a ledger. At any given time, banks expect their clients to withdraw a certain percentage of their balances... For instance, checking accounts are frequently drawn down to zero, savings accounts might be emptied once our twice a year, CDs are almost never withdrawn, etc.
To cover those withdrawals, banks keep a certain amount of physical cash on hand, and an additional amount remains on the ledgers. The rest gets loaned out to their customers for use in buying homes, cars, credit cards,etc. Anything they can't loan out directly gets deposited with the federal reserve or loaned directly to other institutions who need it. However, those last two options tend to be short term (ie overnight) loans.
With debit cards functioning 24/7, you could get cash at an atm or make a purchase anytime of the day our night. The weekend has nothing to do with it.
Which is a long way of saying "No, they do it all the time, not just on weekends" ;)