A bank is a financial institution that provides financial services to people. They are licensed to receive all the deposits and provide loans.
Banks make money by borrowing it from depositors and compensating that borrowed amount with a certain interest rate. Banks sell their money in the form of loans that they provide to common people.
The interest rate which they charge on individuals while taking a loan is very much higher than the interest which they have to give in the depositor's account.
Banks also charge money for the services which they provide.
How do Banks Earn Profits?
Banks earn profits in various ways.
According to Bloomberg, the merchants pay $100 billion in interchange fees annually.
Some examples are:-
So by the above-mentioned points, the bank makes money.
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