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ELI5, how do banks make money if they don't charge interest?
by waynecochran 7y ago
ELI5, how do banks make money if they don't charge interest?
- jobigoud 7y agoMaybe they couple it with other services like the mortgage insurance or a life insurance or they request that your salary be credited to a checking account at their bank. Assuming they make money, could they then go sub zero?
- fyfy18 7y agoWith fractional reserve banking it is even better, as credit effectively creates money out of thin air. This increases the overall supply of money in an economy, so banks can make money from other sources when that money is spent (e.g. credit card processing fees). The loans are considered assets of the bank, so still increases it's value. And if the loan ends up in an account on their books (there's not that many banks in Denmark), they can then loan out that money again minus the fraction they need to hold.