Interest Calculator

Simple interest is charged only on the original principal — 5% on $10,000 earns the same $500 every year. Compound interest is charged on the running balance, so each year's interest itself earns interest. Over a decade the difference is substantial: $10,000 at 5% earns $5,000 simple but about $6,470 compounded monthly.

Most savings accounts, credit cards, and mortgages compound. Simple interest survives in some auto loans, short-term personal loans, and bonds' coupon payments. When comparing offers, always check the compounding frequency behind the quoted rate.