Question

While searching for the best interest rate on a certificate of deposit, Kyle noted that two online banks had better rates than traditional banks that had physical presence in his town. A logical reason why these banks were offering higher interest for depositors is

Answer 1

Answer:

see below

Explanation:

Online-only banks lack a physical presence like traditional banks. They operate over the internet and usually offer higher interest rate than the regular bank. Two reasons make them offer higher interests.

1. Online banks do not require huge space under brink and mortar to operate.  They do not need a large number of employees compared to other banks.  It means they have low operating expenses, hence more profitable. Online-only banks can afford to pass the benefits of low running costs to their customers by offering high interest on deposits.
2. Online-only banking is still a new concept in the banking industry. To gains popularity and attract more customers, online banks are offering higher interest rates than regular banks.