Why do banks pay their customers interest on the money in their savings accounts?

A. High interest rates provide customers with an incentive to choose a particular bank.

B. Interest payments make it more worthwhile for customers to stay loyal.

C. The government requires all savings accounts to pay interest.

D. The bank charged interest when it loaned that money to someone else.

The correct answer is option D "The bank charged interest when it loaned that money to someone else."

Explanation:

Banks utilize the cash saved on investment accounts to loan to borrowers, who pay enthusiasm on their advances. In the wake of paying for different costs, the banks pay cash on reserve funds stores to draw in new savers and keep the ones they have. The distinction between the cash earned as enthusiasm on advances, any working costs, and the cash paid as enthusiasm to investment accounts is benefit to the banks.

An example:

Assume you ssave 1,000€ into an investment account that pays 1% premium. Your advantage installment for the year is 10€. The banks currently credit your 1,000€ to a business at a 8% loan fee and will win 80€ in premium salary. The distinction of 70€ is for the bank. Expecting the bank has 30€ worth of costs to pay for workers, property, protection and different costs, the banks benefit from your cash is 40€.

A financing cost is a number that portrays how much premium will be paid on a credit (or the amount you'll procure on enthusiasm bearing stores). Rates are normally cited as a yearly rate, so you can make sense of how a lot of premium will be expected on any measure of cash.