How Do Banks Make Money?

Banks continually spend money by sending us our debit cards, periodic statements and supporting the digital infrastructure needed to process online payments and transactions.  

What Exactly Is A Bank?

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.

Different Types Of Banks

Before we dive into how banks make money, we need to understand there are different types of banks, and they all make money in different ways.  - Retail Banks - Commercial Banks - Central Banks - Credit Union

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

How Do Banks Make Money?

Traditional banks use depositors money to make money off of other people in the form of financial products like: – Vehicle loans – Credit card payments – Short-term loans – Small business loans – Personal loans

Loans And Other Interest-Bearing Financial Vehicles

The ways a bank makes money and pays customers for the use of their money is known as net interest margin.  

Defining Net Interest Margin

By lending borrowers the money from depositors, banks profit heavily from various fees and interest rates. These simple fees can result in tens of thousands of dollars in profit paid to the financial institution. 

Annual Percentage Rates Are Powerful Income Sources

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