Know why loan rates are higher than deposit rates

1 Risk premium If you compare a deposit to lending money to a bank, a loan is when the bank lends money to you. You have a higher risk of not repaying the money than the bank does, so there's a risk premium and the interest rate on a loan is higher

2 The bank has to pay a legal reserve for deposits, which can be seen as one of its costs, so it needs to raise the interest rate to make up for the loss from the decrease in the volume of deposits

3 The bank cannot lend out all its deposits. They can't lend out all their deposits, first of all, they have to have excess reserves, and secondly, they don't always have as many people to lend to, so they have to raise the interest rate on their loans

4 Banks have to incur costs to run their business, and also they have to make a profit...