Why do banks actively promote credit cards and personal loans to consumers?

• A. Because offering credit cards and loans reduces the bank's risk of default.
• B. Because banks are required by law to offer credit cards and loans to all customers.
• C. Because these products generate interest income and fees, increasing the bank's profits.
• D. Because these products help banks avoid government regulation.

Answer: (C)

Verified step by step guidance

1. Understand the role of credit cards and personal loans in a bank's business model: these financial products are sources of revenue for banks.
2. Recognize that banks earn money primarily through interest income and fees charged on loans and credit card balances.
3. Analyze why banks promote these products: by encouraging consumers to use credit cards and take personal loans, banks increase their potential to earn interest and fees.
4. Consider the risk aspect: while loans and credit cards carry some risk of default, banks manage this risk through credit assessments and interest rates, so the primary motivation is profit generation rather than risk reduction.
5. Conclude that the main reason banks actively promote credit cards and personal loans is because these products increase their profits through interest income and fees.