We have examined the creation of bank credit in exchange for a promise to repay. For completeness, we should briefly look at the destruction of bank credit.
We have already seen some situations where bank credit is destroyed. Mr Smith's bank credit was destroyed when he paid a cheque to Mrs Jones or Mrs Apricot. However, in each case, the same amount of bank credit was created in the recipient's bank account, so the total bank credit in the system is unchanged.
Bank credit is also destroyed when cash is withdrawn, and in that case the total amount of bank credit does decrease. It will increase again if the money is subsequently paid into a bank account.
Finally, bank credit is also destroyed when a loan is finally repayed. The bank credit is reduced by the amount of the loan, and the corresponding promissory note is destroyed too.