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Why does everyone keep referring to checking accounts as "loss leaders"? They are more like "income leaders" - the banks are funding themselves at basically 0%
by solaxun 8y ago
Why does everyone keep referring to checking accounts as "loss leaders"? They are more like "income leaders" - the banks are funding themselves at basically 0% and then earning the spread on whatever they invest in....
- alexhutcheson 8y agoThe banks incur lots of operational expenses processing transactions, paying for an ATM network, handling customer support calls, dealing with fraud, etc.
- solaxun 8y agoThat is nothing compared to interest expense on CD's or other interest bearing accounts. Checking accounts are one of the most attractive sources of funding for banks (notwithstanding maturity mismatch).
- delta-neutral 8y ago+100%, deposits are the cheapest and most reliable source of funding. no comparison to wholesale funding by a large stretch - anyone ever heard of Northern Rock?