How do commercial banks make a profit?

For any bank to survive without relying on liquidity measures like state intervention to save it, it must make a profit from various sources. Commercial banks get their money from various schemes such as investing, credit interest rates, and using their own bank fees and the cards they charge their customers.

By pooling the large capital base made up of cash deposits, a bank can invest the money in the meantime in profitable schemes that have a financial implication in the bank and through advertising. Another more common standard for doing business by commercial banks is to charge interest on loans that can generate a large amount of profit ranging from one-tenth of the slow amount to twice or more on certain long-term transactions. In special cases such as loans that have a high risk value, especially those that are granted on an economically insecure basis, banks charge a high interest rate that will cushion the credit consequences in case of loss. In this way, a bank can obtain a high profit when the external factors remain the same and the customer makes his refund.

Financial fees such as those involved in opening an account are some of the other means of making money for a bank. This is possible in a case where the commercial bank enjoys a large following which, when other long-term security measures are excluded, has little effect on the custodial charges that come with the deposit. Other charges include those listed in transfer fees and ATM fees for city residents who do not have access to the physical bank or are limited by the time to visit the actual bank. Banks can also offer money transfer services through cell phones by including higher service charges than normal rates in the telecommunications industry.