Why do only online banks offer this? If the rate is 6% and you put in 100k, then does it stay 6% for as long as you have the money in there….even if it’s years? How safe is this and why aren’t more people doing it.
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ELI5 answer: They offer this because we have what’s known as a fractional banking system. They can lend 9x as much money as they have in deposits. So… if they can make 8% on a mortgage, then they’ll need to have at least 1/9 of that in assets. Thus, it works in their favor to offer good rates for deposits when they know they can make money by lending it back out.
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