Every time people use their credit cards, the bank has to send the money to the merchant at some point. Most people pay their CCs at some point but while the banks wait for that, how are they able to credit the merchant?
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Because they loan out more money than just Credit Cards. They have many different types of loans, all of which pay them more money than they are paying out.
Mortgages, business loans, personal loans, car loans..etc all make money for the bank. On top of people only paying the minimum payment on the Credit Cards all come together to make money for the Bank.
Plus you have the fact that People and Businesses are keeping their money in the bank’s system itself. That money doesn’t just sit in a vault somewhere. The banks uses that money to give out loans and make payments that it has to, such as Credit Card charges you make.
All of this works together to ensure than they have more than enough to make any payments for you using your Credit Card.
And if things get tight because they’ve loaned out too much money, they always have the option to take out a loan themselves.
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