Most banks have totally free checking ...
and pay lost of interest to people who have CD's and Savings accounts
and they spend millions advertising ...
and have to pay all there employees!
i just dont get it - how do banks make so much money?
2007-07-17 06:49:52 · 8 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
They make money on interest on loans and credit cards. They also make money on ATM fees.
Banks earn money in three ways:
* They make money from what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make.
* They earn interest on the securities they hold.
* They earn fees for customer services, such as checking accounts, financial counseling, loan servicing and the sales of other financial products (e.g., insurance and mutual funds).
Banks earn an average of just over 1% of their assets (loans and securities) every year. This figure is commonly referred to as a bank's "return on assets," or ROA.
2007-07-17 06:59:16 · answer #1 · answered by mister_galager 5 · 2⤊ 0⤋
Ah! The wonderful world of banking!
The way banks get money is by loaning it out. Banks pay individuals interest, but then they turn around and loan it out in the form of auto loans, lines of credit, or mortgages. They can offer free checking (usually with a minimum balance) because they get to make money on your money by loaning it out. You'll notice there's a hefty spread between what banks will pay on savings account and what they charge for loans.
Here's a hilarious situation that happens all of the time and will also explain how banks make well...bank. There was a guy who had $25,000 in his savings account. He got paid 1.5% interest on his money. He decided he wanted to buy a new Harley that cost $25,000. He went into his bank and borrowed $25,000 in the form of a vehicle loan and they charged him 6.5% interest. He was thinking that he got a great rate.
Essentially, the bank loaned the guy his own money back and charged him a net 5% to do it.
Hopefully that clears things up, grasshopper. They make money on the spread. They aren't going out of business any time soon.
2007-07-17 07:03:00 · answer #2 · answered by Dave1001 3 · 1⤊ 0⤋
Even a free checking account has fees. So if you write a check before your deposit clears, they may hit you with an overdraft fee, etc.
So like the other people said: fee income, interest on loans that they make, the spread, etc.
2007-07-17 07:03:13 · answer #3 · answered by hottotrot1_usa 7 · 0⤊ 0⤋
They make loans that have interest on them. We just borrowed 2000.00 and will have to pay back 2700.00 by the time we have paid it off.
2007-07-17 06:57:49 · answer #4 · answered by orphan annie 5 · 0⤊ 0⤋
#1 Online Paid Surveys : http://OnlineSurveys.uzaev.com/?xzeJ
2016-07-07 19:50:31 · answer #5 · answered by ? 3 · 0⤊ 0⤋
Dwarfs press the money at midnight.
2007-07-17 06:57:00 · answer #6 · answered by Anonymous · 0⤊ 1⤋
My overdraft. Lend me a pound or t wo.
2007-07-17 07:25:32 · answer #7 · answered by Anonymous · 0⤊ 0⤋
intrest and atm fees
2007-07-17 11:03:30 · answer #8 · answered by Anonymous · 0⤊ 0⤋