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How Do Banks Make Money?

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Banks are financial institutions that are legally allowed to receive money from depositors (customers like you and me) and use that money to issue loans to other customers.

What Exactly Is A Bank?

Different Types Of Banks

Retail Banks Commercial Banks Central Banks Credit Unions

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Banks make money from three primary income structures. They make money from net interest margins, fees, and interchange.

How Do Banks Make Money?

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Traditional banks use depositors money to make money off of other people in the form of financial products like:

Loans And Other Interest-Bearing Financial Vehicles

– Vehicle loans – Credit card payments – Short-term loans – Small business loans – Personal loans – Private student loans

Net Interest Margin

Ways a bank makes money and pays customers for the use of their money.

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By lending borrowers the money from depositors, banks profit heavily from various fees and interest rates. For instance, the credit card in someone’s pocket may have a 21% interest rate attached to it. 

Annual Percentage Rates Are Powerful Income Sources

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