How banks make their profits

[S3VIDEO file=’M038-using-bank-money.mp4′]

We give the banks our money to keep it safe and earn some interest income. Meanwhile, the banks turn around and lend the money to someone else in order to make money by charging a higher interest rate. Banks can legally extend considerably more credit than they have cash. Still, most of us have total trust in the bank’s ability to protect our money and give it to us when we ask for it.

This works because of our trust to the banks. We are just used to it already because our parents say so.

[wlm_firstname], did you get excited on your first credit card?