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How Banks Make Money
Transcript of How Banks Make Money
When interest rates are low =
It encourages borrowing…cheap to borrow
When interest rates are high =
It encourages investing…high return 3.) Interest Rates Banks lend money out in the form of loans for things like…
-Home buying -Cars
-Additions -College 3.) Interest Rates On your own, complete the second chart based on Jane’s purchases…
What was her ending balance?
-$258.97 2.) Overdraft How much did this cost you?
By over drafting a mere $50.00…
You ended up paying and extra $90.00 in fees.
Last year banks in the U.S. collected over $17.5 billion dollars in overdraft fees! 2.) Overdraft v v v v v v v v v v Day 5 Day 4 Day 3 Day 2 Day 1 2.) Overdraft Start with a balance of $200.00
What happens when you write a check for more than you have in your account? 2.) Overdraft What happens when you write a check and there is not enough money in the account?
Your check “bounces”
The bank actually pays the money for you, and charges you a fee 2.) Overdraft 1.) Fees
3.) Interest Rates Banks Make Money by… How Banks
Make $$$ The Fed cuts interest rates…
To encourage spending
In times of economic decline to speed up the movement of money
The Fed raises interest rates…
- To encourage saving
-In times of economic growth to slow down the flow of money 3.) Interest Rates When they lend this money out, they charge interest
Interest is the cost of borrowing.
If George loans me $10…he may ask for $11 at the end of the week.
($1 out of $10 is a 10% interest rate) 3.) Interest Rates Banks charge money for certain services…
Minimum Balance Requirements
Money Transfers, Wires
ATM Fees 1.) General Banking Fees TEST PROBLEMS "If you want something you've never had, you'll have to do something you've never done." Dave Ramsey