Why do banks want you to keep your money with them?

Banks play a pivotal role in managing finances by providing a secure haven for customers' cash. This service often comes with minimal interest rates, ensuring that individuals and businesses can store their funds with peace of mind.

Beyond safeguarding deposits, banks utilize these funds to generate revenue through strategic investments. By leveraging their clients' money, banks engage in financial activities that yield greater returns than the interest paid to depositors.

One primary means of achieving this is through lending. Banks grant loans to diverse borrowers, including businesses seeking capital for expansion and individuals with personal financial needs.

These loans carry interest rates that exceed the amounts banks pay to depositors, creating a profit margin for the institutions. The difference between the loan interest and deposit interest serves as the foundation for banks' profitability.

By facilitating lending, banks not only enrich themselves but also stimulate economic growth. Businesses use loans to fund expansion projects, creating jobs and driving innovation. Consumers, too, benefit from access to credit, enabling them to make purchases and investments that improve their lives.