How To Make Money Like a Bank: 7 Methods Exposed

Last Updated on June 4, 2023 by John Cirelly

Banks use money to make money, which can snowball into huge returns. But the real question is, how can you use these strategies to earn extra income? Below, I’ll explain the 7 methods of how you can make money like a bank.

How To Make Money Like a Bank in 2024

1. Invest In Bonds

If you’re willing to embrace some risk and explore alternatives to conventional savings accounts, the world of bonds may hold intriguing possibilities.

Investing in bonds is like extending a loan to the entity issuing them, be it a government or a major corporation. As the bond matures, you receive your principal back along with any interest accrued. You can explore various options, such as U.S. Savings or Treasury bonds, or bonds issued by prominent companies. Each bond carries its own interest rates and repayment terms, with higher-risk bonds often offering more enticing returns. Typically, bonds with longer terms and corporate bonds with greater default risks yield higher interest rates.

It’s important to bear in mind that the value of bonds can fluctuate if market rates shift. In fact, bond prices move in the opposite direction of their interest rates. This means that if you decide to sell your bond before it matures, you may need to do so at a price lower than what you paid. Nevertheless, bonds generally pose less risk than stocks, making them an appealing option for increasing the yield of your savings while accepting a reasonable level of risk.

Amid the current context of heightened inflation rates, many bond investors have turned their attention to Series I bonds. These bonds have an interest rate that adjusts in response to inflation, ensuring that your money retains its purchasing power over time. At the height of inflation, I made a guaranteed 7% on my money in 12 months.

Take into account your risk tolerance, investment objectives, and prevailing market conditions. If you’re learning how to make money like a bank, bonds offer one of the safest opportunities to grow your money over time.

2. Build Your Credit

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3. Take Advantage of Sign Up Bonuses

Both bank accounts and credit cards can have seriously lucrative signup bonuses. For instance, when I was planning a trip to Japan I signed up for the Chase Sapphire Preferred and got $700 in free travel by meeting their spend requirements.

Bank accounts also have offers, where if you deposit a certain amount into a new account, they will give you free money. It’s usually a few hundred dollars, which adds up!

To stay informed about current offers, I recommend searching for banks near your location using Google Maps. Simply enter “banks” followed by the name of your city. Then, take the extra step of searching for each bank’s name along with the phrase “signup bonus” to discover any ongoing promotions. Just remember to carefully read the fine print to ensure that you meet all the qualifications and requirements for each offer.

By staying proactive and keeping an eye out for these opportunities, you too can take advantage of these enticing bank account bonuses and add some extra cash to your wallet.

4. Open a High Intrest Savings Account

When searching for high-interest savings accounts, online banks are often the best place to start. These banks, with their cost-saving advantage of no physical branches, typically offer attractive benefits such as no monthly fees and significantly higher interest rates compared to traditional banks.

Currently, some high-yield savings accounts boast annual percentage yields (APY) of around 4.75 percent, which is nearly 20 times the national average rate of 0.25 percent for regular savings accounts.

To put this into perspective, let’s consider a scenario where you deposit $2,500 into an account and examine the potential interest earned after one year:

• Account earning 4.75 percent APY: You would earn approximately $118.75 in interest.
• Account earning 0.25 percent APY: You would earn only $6.25 in interest.

By opting for the high-yield savings account, you could potentially earn an additional $225 in interest compared to the traditional account. To calculate your own potential earnings, you can utilize Bankrate’s savings account interest calculator. This tool allows you to input specific dollar amounts, interest rates, and timeframes to determine the potential growth of your savings.

Considering the significant difference in potential earnings, exploring high-yield savings accounts at online banks can be a wise choice for maximizing your savings and making the most of your financial resources.

5. Look for Reward Checking Accounts

Reward checking accounts can be a lucrative option for those who frequently make purchases using a debit card. Some banks offer cashback rewards on debit card purchases, while others provide higher interest rates on certain account balances. However, it’s important to consider the requirements and limitations associated with these accounts.

For instance, Consumers Credit Union (CCU) offers their Serious Interest Checking account with interest rates as high as 4 percent on balances up to $15,000. To earn this rate, you must meet specific criteria, including signing up for electronic statements, making at least 12 debit card purchases per month, receiving a total of $1,000 or more in recurring direct deposits during the statement cycle, and maintaining an average daily balance of at least $1,000.

When choosing a rewards checking account, ensure that the requirements to qualify for the elevated interest rate are manageable for you. Failing to meet these requirements may result in earning lower interest than what a standard savings account would offer.

Just make sure you can meet the requirements. Nothing is worse than spending all this time get a reward only to fall short. If you can easily meet the requirements, you can make an informed decision about whether it’s the right choice for maximizing your earnings and aligning with your spending habits.

6. Research Money Market Accounts

Money market accounts offer a fantastic blend of savings and checking accounts, giving you the best of both worlds. Not only do they provide the opportunity to earn interest, but they often offer even higher rates than high-yield savings accounts. Plus, you get the added convenience of check-writing privileges and the flexibility to make withdrawals using a debit card.

It’s important to keep in mind that money market accounts can come with higher fees and minimum balance requirements compared to regular savings accounts. So, be sure to carefully review the terms and conditions before diving in.

But here’s the kicker: just because your bank offers a money market account doesn’t mean it’ll automatically have a better interest rate than its regular savings account. It’s a good idea to compare rates and terms across different banks to ensure you’re getting the best deal.

All in all, money market accounts can be a fantastic option if you’re looking for a balance between earning interest and having convenient access to your funds. Just make sure to consider any associated fees and requirements before making your final decision. Happy banking!

7. Build a CD Ladder

CD ladders are an ingenious way to combine the attractive rates of CDs with the flexibility we all love in our savings accounts.

Here’s how it works: Instead of putting all your money into a single CD with a fixed term, you create a CD ladder by opening multiple CDs with different maturity dates. Let’s say you open a one-year CD each month for a year. This way, you’ll have one CD maturing every month the following year. To help you build the perfect CD ladder tailored to your needs, Bankrate’s CD ladder calculator comes in handy.

By using a CD ladder, you no longer have to worry about locking up all your funds in a single long-term CD. Instead, you can enjoy the convenience of accessing portions of your money at regular monthly intervals. And the best part? You won’t have to pay any penalties for early withdrawals if you suddenly find yourself in need of cash.

The beauty of a CD ladder is that you have the freedom to structure it according to your preferences. How much flexibility are you willing to sacrifice for higher interest rates? How frequently do you want to have access to your funds? These are the questions that will guide you in crafting your CD ladder.

For example, you could opt for a five-year CD ladder, consisting of CDs with different terms ranging from one to five years. As each CD matures, you can reinvest in a new, higher-yielding five-year CD, while still having one CD maturing each year.

With a CD ladder, you can enjoy the best of both worlds—competitive interest rates and the convenience of accessing your funds at regular intervals. It’s a smart strategy for maximizing your earnings while maintaining flexibility.

How Banks Make Money

Banks have a couple of main ways they make their money: commercial banking and investment banking. Let’s break it down and see how they generate revenue through these different avenues.

In commercial banking, banks offer everyday products and services to individuals and businesses. This includes things like savings accounts, checking accounts, mortgages, and loans. How do they make money from these? Well, it mainly comes down to the interest charged on loans and the fees associated with banking services. When banks lend money to borrowers, they earn interest on the amount borrowed. They also charge fees for services like maintaining accounts, handling overdrafts, and conducting wire transfers.

On the other hand, we have investment banking. This is where banks provide specialized financial services to corporations, institutions, and high-net-worth individuals. Think of things like mergers and acquisitions, underwriting securities, managing investments, and offering financial advice. Investment banks earn their revenue through fees and commissions related to these services. They might charge fees for providing advice, helping with the issuance of new securities, facilitating corporate transactions, managing investment portfolios, or offering wealth management services.

By engaging in both commercial and investment banking, banks can diversify their income streams and cater to a wide range of customers. Commercial banking relies on interest income and service fees, while investment banking thrives on fees generated by offering specialized financial services. This dual approach allows banks to provide comprehensive financial solutions while also ensuring they have a solid revenue base.