The Middle Ages for Kids - Medieval Banks

Rise of Trade Fairs: At first, trade fairs were traveling marketplaces, offering goods for sale by many different sellers. A fair would be set up for a couple of weeks. Then the sellers would move on to another location.

Trade fairs grew quickly in both size and importance. Goods were pouring in by ship and by caravan from Africa, Asia, and other parts of Europe.

Some traders, from faraway places, arrived personally with goods to sell in the growing trade fairs. Along with goods, the traveling merchants and traders brought their own coinage.

Banks: Traders needed moneychangers who would exchange one form of currency for another. Moneychangers charged for this service, just as bankers did in ancient Greece, and just as banks do today. Moneychangers only charged a small amount per exchange, but so many exchanges happened at the fairs that most bankers became quite rich.

Money: Barter was no longer an accepted form of payment. Merchants wanted money for their goods. The nobles wanted the luxury goods they sold. But the nobles did not have a lot of cash to use to buy them. Nobles had always used the manorial system, a barter system, to gain the goods they needed.

To raise money, the nobles began to sell their crops for cash. They used the money they made to buy luxury goods. Many ordered more luxury goods than they had cash to purchase. To get more cash, some nobles borrowed money from the new banks, offering their land as guarantee of payment.

It never occurred to these nobles that they actually had to pay the banks back. The banks were owned and operated, for the most part, by peasants. It came as a huge shock to the nobles that their king was going to make them pay back their loans or lose their lands.

Although the nobles were shocked, and many did lose their land, the king was thrilled with the new money system. It allowed him a way to easily tax the noble lords, the craftsmen, the traders - both local and foreign - and the moneychangers.