Banks can be small community institutions that have just one or a few locations or they can be huge companies with thousands of branch locations all over the country. There are Internet-only banks with no physical location to visit and only a website address. In addition to holding your money, banks also offer a variety of services to help you manage your money.

Banks stay in business by using the money you deposit to make a profit by offering loans to other customers or businesses. They lend to customers who want to borrow money for big purchases like cars or homes. They also lend to small and large businesses for making purchases like inventory and equipment.

When you take a loan from a bank, you’re charged interest, which is an additional charge on top of the amount you borrow. To stay profitable, a bank must receive more money in interest from borrowers than it pays out in the form of loans to customers.

Despite the benefits banking institutions offer, almost one-third of Americans are “unbanked” or “underbanked” and use no or few basic financial services. According to the Federal Deposit Insurance Corporation (FDIC), these individuals typically have low income. FDIC data shows that for households with annual income of less than $15,000 per year, 28% have no bank account and another 22% use less than a full range of banking services.

Consumers may not use banks for a variety of reasons, including the lack of a conveniently located branch office or the desire to avoid bank fees. However, some potential customers do not take advantage of the services banks offer because they don’t understand how banks work or how much nonbank alternatives cost. In this section you’ll learn why going without banking services is both expensive and inconvenient.