It just seems like a semi necessary thing to have to use a bank, why do they pay me a % to keep money there?
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Interest is essentially rent you are paying because you are borrowing someone else’s money. When you take out a loan, you are renting someone else’s money, and you pay rent (interest) on that money until you give it back. The more you borrow, the more rent you pay. It’s the only reason anyone lends you money.
When you give some money to the bank to keep, THEY are essentially borrowing YOUR money, so they pay rent on it. But they don’t pay you nearly as much rent (interest) as they charge to others. That’s one way banks make a profit.
That’s also the reason some businesses and government entities (like the IRS) charge you interest if you are late. They are essentially saying “You owe us all this money now. You didn’t pay, which means basically you are now renting this much money from us. We should have it, but we don’t, so you are renting it from us, against our will. So we are at least charging rent (interest) on this money you haven’t paid yet.”
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