please ACTUALLY explain this like im 5 i genuinely cannot grasp this concept whatsoever. i’m opening a savings account and it says;
“The interest rate depends on your account balance. All rates are variable. 4.25% p.a. on balances less than $50,000. 4.25% p.a. on balances between $50,000 – $249,999.”
am i paying for my own savings account???? what??????? i am so confused i feel like im going crazy
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It’s the amount of money paid for using somebody else’s money. If you borrow money to buy a house or car, you pay interest on the money borrowed. If you open a savings account and that allows the bank to lend out your money, they pay you interest on your savings. So in your case, a bank pays you 4.25% on your savings account balance and then the bank in turn lends money deposited into it for car loans or home mortgages at, say, 7% and the 2.75% spread is their revenue.
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