How Do Banks Make Money from Interest Rates?

Banks make money by borrowing your money and lending it to someone else at a higher rate. It’s like when you lend your friend $10 for a week, but they give you back $12, the extra is how banks earn their profit.

How it works: When you save money in a bank, they pay you interest as a thank-you. But if they loan that same money to someone else, like a business or another person, they charge them a higher interest rate. The difference between what the bank pays you and what they get from the borrower is their profit.