Banks are central to the global economy, acting as intermediaries between savers and borrowers while facilitating transactions and financial services. Their ability to generate profit is tied to various revenue streams, primarily interest rate spreads, fees, and financial services. Understanding how banks make money helps consumers and businesses navigate the financial system more effectively. Interest Income One of the primary ways banks make money is through interest income, which arises from lending activities. Banks accept deposits from individuals and businesses, paying depositors a relatively low interest rate. They then lend out a portion of these deposits to borrowers, such as individuals taking out mortgages, businesses securing loans, or governments issuing bonds, charging a higher interest rate. The difference between the interest earned on loans and the interest paid on deposits–known as the net interest margin (NIM)–is a fundamental source of bank profits. Banks carefully manage risk and liquidity, ensuring they maintain enough cash to meet withdrawal demands while maximizing their ability to lend profitably. This balance is a critical factor in banking operations. Fees and Commissions In addition to interest income, banks generate revenue through