How do banks make money from their customers?

Answer 1

Banks make money from their customers through various ways such as:

1. Interest on loans: Banks lend money to their customers at a higher interest rate than what they borrow from the central bank. The difference between the two rates is the bank’s profit.

2. Fees and charges: Banks charge fees for various services such as ATM withdrawals, account maintenance, wire transfers, and overdrafts. These fees add up to the bank’s revenue.

3. Credit card fees: Banks charge annual fees, interest charges, and other fees for using credit cards. They also receive a percentage of each transaction made on the card.

4. Investments: Banks offer investment products such as mutual funds, stocks, and bonds. They charge a commission for these services.

5. Foreign exchange: Banks make a profit by buying and selling foreign currency. They charge a fee for converting currencies.

6. Interbank lending: Banks lend money to each other at interest rates decided by the central bank. Banks that have excess funds lend them to banks in need of funds. The interest earned on interbank lending is a source of revenue for banks.