Do banks and credit cards make more money? Or is all the extra money they collect going to pay extra interest on loans from the government?
Does the government make more money?
Who’s getting the 5% extra on my credit card interest?
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Banks often profit of rising interest rates. (long term)
They can charge more on loans, and credit cards. They do have to pay more on deposits, but they generally have a greater spread as interest rates rise.
Banks can absolutely be harmed by interest rates as well, especially in the short term. For instance, Silicon Valley bank was not prepared for interest rates to go up. They had lots of money in government bonds which paid low interest rates, which caused the value of those bonds to fall.
Other places like insurance companies profit as well. For instance, a hurricane hits, and a major insurance company pays out billions. That means they have billions set aside for claims, and benefit from higher interest on those deposits.
The US government will lose money on higher rates, as we have a lot of debt, and higher interest rates mean larger interest payments. Even if a lot of debt has a fixed rate, new debt is issued based on today’s rate.
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