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Thursday
Jul262012

One Way Banks Make Money

Have you ever wondered how banks make money. Before you start screaming at your computer screen about the fees they charge to keep your "free" checking account open - I mean real money. While fees and retail banking products make up a chunk of a banks potential earnings a lot of it comes from larger financial transactions like mortgages. 

Today I have another infographic for you that tells the story of the Fractional Banking System and it's called How Banks Make Money From Home Loans from the good folks at Tomorrow Finance

First a quick definition: Fractional Reserve Banking refers to a banks Reserve Requirements set by the Federal Reserve. It's a banking system which requires the commercial banks to keep only a portion of the money deposited with them as reserves. The bank pays interest on all deposits made by its customers and uses the deposited money to make new loans. 

I told you it was a pretty cool infographic today. So as you go out and make your way through the sea of banks make sure you keep in mind what your deposits might be potentially funding. Make sure that you are banking with a place that not only provides what you need but is willing to work with you as well.

And if you have any questions or comments you can ask away below :) 

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Reader Comments (1)

Every one understands that today's life is expensive, but some people require cash for various things and not every person earns enough cash. So to get fast loan or just small business loan would be good way out.

September 26, 2012 | Unregistered CommenterMckayGinger23

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