0
If a bank agrees to take your deposit, they don't keep it all in the bank. Because only a small percentage of the bank customers will demand their money at any given time, a percentage of all deposits, called vault cash, is kept on hand. The rest is loaned out, so that it can earn interest. Some of this cash is loaned to credit card companies, so that they can finance the purchases their customers make, until the customer pays the credit card company back. Actually, most credit card companies are organized as banks, so that they are regulated in a different way than regular companies. Because of the way the American accounting system works, the more money that is owed a company or a bank, the more that the company or the bank is worth. Even though the debt may be uncollectable, it can still be shown as an asset on a balance sheet. So, the more money that the credit card company can loan out, the more money the credit card company is worth. (on paper.) This is why we are constantly receiving offers for credit cards, even if we have just declared bankruptcy.
To read more, visit:
http://www.tradingstocks.net/html/banks_create_money.html
Merlin Ankunding
Add your answer:
Earn +20 pts
Which credit cards have no annual fees?
almost all credit cards have annual fees, that is how the banks make money the best thing to do is shop around and choose the best one.
What are functions of debit and credit cards?
Credit cards are issued to customers of companies who offer lines of credit. The card can be used to make purchases or payments in stores and online. Debit cards on the other hand are issued by banks or prepaid debit card companies. They have the same role as a credit card allowing consumers to make payments or purchases in stores and online, but can also be used to withdrawal money from an ATM.
What is the purpes of ATM?
For the banks: To make money. For regular people: To take money from their credit card and make it physical money.
Why should there be any interest rate on credit cards?
So that the banks can make a profit from lending the money. Banks can reward responsible customers with better rates. The interest rate is also used to attract new customers to their products.
If there is no assets who's responsible for credit card debt?
If a person dies and owes money on credit cards, the person who issued the credit cards loses. The merchant still gets his money. (The credit card companies make money by charging merchants a small fee on each transaction. They make interest. They lose money on deadbeats and deaths.)
How do you make money using credit card?
get cards from evry bank and sell it to junk dealer ???
Do any instant credit cards offer low interest rates?
The instant credit cards to not have very low rates on them as that is how they make their money. Try using a Visa to get low rates.
Which companies offer a green credit card?
Green credit cards can be found anywhere in which there is a option for green credit. However not many companies offer green credit cards because the company loses some money on the purchases you make.
Could be possible you use electronic money rather than cash money?
Many people use electronic money (credit cards) compared to using cash. The cards make it easy to track your money.
How can you get free money from a credit card?
By grafting. Its difficult but can work. Search google for grafting credit cards. It involves having many credit cards and transferring the money from one the the others with a 0% transfer fee. Having cash back etc very difficult and a bit pointless for the money you make
What is credit creation?
Credit creation, in economics, is the situation wherein banks make more loans to consumers and businesses. It results to an increase in the amount of money in circulation.
Are there any truly free credit cards?
Most banks will be glad to give you a credit card, and many of them will not even charge a annual fee. But all credit cards will charge an interest if you use them to make a purchase and not pay it back entirely during the specified time - usually that statement period.
