How Banks Actually Make Money From Your Deposits

When, you, deposit, $1,000, into, a, bank,, that, money, doesn't, sit, in, a, vault, with, your, name, taped, to, it., Banks, keep, only, a, portion, of, deposits, readily, available, and, lend, most, of, the, rest, out, to, other, customers, as, mortgages,, car, loans,, business, loans,, and, credit, card, balances., This, is, called, fractional, reserve, banking,, and, it's, the, foundation, of, how, a, traditional, bank, actually, earns, money.

The, core, of, the, business, is, the, spread, between, two, interest, rates:, what, the, bank, pays, you, to, keep, your, money, there,, and, what, it, charges, someone, else, to, borrow, it., A, basic, savings, or, checking, account, has, often, paid, a, fraction, of, a, percent,, while, a, 30-year, mortgage, in, the, mid-2020s, has, typically, charged, somewhere, around, 6., 7%,, and, average, credit, card, interest, rates, have, run, well, above, 20%., That, gap., Called, the, net, interest, margin., Is, a, bank's, primary, source, of, profit.