how do banks create money?

Answer 1

They don't create money. They make money.

Some of the common ways banks make money:

Pay lower interest for deposit and charge higher interest from borrowers. For example, you deposit $1000 in a checking account that pays you 1% interest a year. The bank lend $1000 to someone else and charge them 7%. So they pocket the 6% difference.

Large banks has currency exchange services. Again it is the same idea buy low sell high. For example, you have 1000 Euro that you want to change into US dollars. They give you $1005 US in exchange for the 1000 Euro. Someone else comes to the bank and want to buy Euros, bank would charge them $1200 to buy the 1000 Euro. The bank pocketed the $195 difference.

Banks also make money from investment in properties, REITs etc.

Best wishes.

Answer 2

They charge interest on money borrowed.