Banks receive money from savers and pay them an interest rate. They lend that money to borrowers at a higher rate, giving them their profit margin. Over time this difference in the rate helps them to build up reserves (some of which a bank will pay to its shareholders; a building society or credit union can decrease the difference in rates instead) which they can also lend to borrowers. The reserves will obviously need to be sufficient in case that everyone decided to get their money back at the same time, which is why they offer a better rate on fixed-term savings (1 year, 2 years) where you can't access your money at all during that term, ensuring that they don't need to worry about suddenly having to return it.