As mentioned before, banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans and interest payments from the debt securities they own, and pay interest on deposits, CDs, and short-term borrowings.
What are banks used for?
According to Britannica.com, a bank is: an institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and make loans and derive a profit from the difference in the interest rates paid and charged, respectively. Banks are critical to our economy.
Why is it safe to keep your money in a bank?
A bank is a safe place to keep your money. It is safer than keeping lots of cash in your house, which might get lost or stolen. It is also a good way to save money for the future. Your money will earn interest in a bank, meaning over time the amount of money will increase.