Although the practice of depositing money and withdrawing it from a central source, and even borrowing money, had been known for many hundreds of years, it was not until the Middle Ages and the widespread nature of commerce and trade that the need for credit banking arose. Here, banks circumvented the prescription of the Roman Catholic Church against usury (the charging of any interest whatsoever), and invented means of hiding interest charges. Often times this was done by borrowing a sum in one currency at one place, and redeeming it in another currency, at a different place, with the interest charges hidden in the rate of exchange. Banks loved this idea and began to flourish in numerous places that had never before needed banks: indeed, almost any town with a trade fair was fertile enough ground for someone to establish a bank.

The rise of credit banking meant not only that merchants could travel outside the territory in which they were known in order to trade; but now, ordinary craftsmen and townspeople could borrow money for equipment, supplies, and other ventures. Without the rise of credit, the townspeople would be at the mercy of the money available to their friends, relatives and neighbours; with credit banking, they could plead their case before an impartial person.

Of course, not everyone wanted to do business with the banks, and craftsmen still sought investors; however, as commerce grew, and trade became the lifeblood of cities, the banks made possible the growth of medieval cities into large trading centres.