Do banks loan out your money?
Banks don’t lend out of deposits; nor do they lend out of reserves. They lend by creating deposits. And deposits are also created by government deficits. Reserves play a pivotal role in money creation but not in the way often envisaged.
Do banks want your money?
The Bottom Line
And it is for this reason that although banks don’t need your money, they do want your money. As noted above, banks lend first and look for reserves later, but they do look for the reserves. Attracting new customers is one way, if not the cheapest way, to secure those reserves.
How do banks use your money to make profit?
Interest is what is charged to borrow money. Banks offer customers a service by lending money, and interest is how they profit off of that service. Typically, interest is charged as a percentage of the amount borrowed. Banks charge interest on a variety of products and services like credit cards, loans, and mortgages.