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For the normal reason of detaining enemy prisoners.

At first, it suited both sides to exchange prisoners, to maintain civilian morale.

But one of Grant's first acts on becoming General-in-Chief in March 1864 was to end the exchange system. He knew that the Confederates were running out of recruits and could not replace their battle-losses. Despite suffering appalling casualities on his own side, he calculated that the enemy would suffer worse, and would have to surrender.

Meantime the prison camps became shockingly over-crowded, and the one holding Union troops at Andersonville, Georgia, was notorious for brutality and starvation.

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Q: Why were pow camps used during the civil war?
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