How do banks make money off of direct deposit?
I recently opened an account with a bank because they said they would give me $100 if i opened an account and used direct deposit. There is no way they would give me $100 if they didnt get anything out of it. So how do they make money?
- 1 decade agoFavorite Answer
They don't make anything off of direct deposit, that they wouldn't make off any other form of deposit, the thing is, they assume that since you're using direct deposit, ur money will sit in the account longer... every day it sits there, it earns them more money.
The way they make money from your money, is by using it in investments, and earning interest, or even dividends on stocks and bonds that they purchase/invest in, using their customer's POOLED money.
They also use customer's money in loans, at high interest rates, which earns them even more.
- jdkilpLv 71 decade ago
First, they make money off ALL deposits, not just direct deposit. They make money from the interest. But, direct deposit SAVES them quite a bit of labor. And, when you use direct deposit, they get the money much sooner than if you take it in and deposit it. The sooner they get it, the more interest they can make. What's more, direct deposit ENSURES that you're going to deposit them money in that bank. If you don't have direct deposit, you can theoretically take the money somewhere else.
- CommonCentsLv 41 decade ago
For every dollar that a bank has in its system on deposit, they can lend out $10...
Having FREE checking accounts gets them loads of money sitting around at near 0% cost to them, but they can loan out 10x that amount.
Mutilply your DD X a few thousand people and then multiply that x ten, and they have huge potential.
Of course money comes and goes, but the more people with deposits, the more that stays in their system.
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- 1 decade ago
They invest your money, that's how! And that's why they want your direct, continuing deposit - it affords them a monthly, secure income - until you spend it, of course! But then they hope you'll put more in their bank, cause they have locked you in with that direct deposit.
- JollyLv 71 decade ago
Same way they make money with their other depositer's money....loan it out at a higher interest rate than the rate of interest they're paying to the depositors.
- Anonymous1 decade ago
First, the money coming into the account is cash, which they (the bank) can use immediately.
Second, they are saving on labor costs because you are not coming into the bank to cash a check.