Eli5 why do banks give interest on money that I am keeping there?

Question

It just seems like a semi necessary thing to have to use a bank, why do they pay me a % to keep money there?

In: 1333

Answer 1

Your money isn’t put into a vault but used actively (for investments, to lend to their other clients, &c.) to generate profit.

So it’s a tool *you* lend them and they pay you rent for its use.

Of course, depending on the financial situation, the rent (interest) can sometimes get negative: then in fact you pay for keeping your money safe at the bank.