Question

Why can a bank afford to pay interest rate on a savings account

Answer 1

Banks use the money from borrowers whom they charge at a high interest rate, and gives a lower rate to the people who have a savings account.

Answer 2

How can a bank afford to pay interest? Banks use the money deposited on savings accounts to lend to borrowers, who pay interest on their loans. ... The difference between the money earned as interest on loans, any operating expenses, and the money paid as interest to savings accounts is profit to the banks.