Interest Calculator
Calculate both simple and compound interest to see how your money grows over time. Compare different interest calculation methods.
Should I use simple or compound interest?
Use compound interest for accuracy - it's what banks and investments actually use. Simple interest underestimates growth. Example: $5,000 at 5% for 10 years - Simple = $7,500 total, Compound = $8,144 total. The difference grows larger with higher rates and longer periods. This calculator shows both for comparison.
How often does interest compound?
Common compounding: Daily (savings accounts, some loans), Monthly (mortgages, credit cards), Quarterly (some CDs), Annually (bonds). More frequent = more interest earned/paid. Daily compounding earns slightly more than monthly, which earns more than annual. However, interest rate matters more than compounding frequency.
What is APY vs APR?
APR (Annual Percentage Rate) is simple interest rate. APY (Annual Percentage Yield) accounts for compounding. Example: 5% APR compounded monthly = 5.12% APY. Banks show APY for savings (makes rates look higher) and APR for loans (makes rates look lower). Always compare like-to-like: APY to APY or APR to APR.
How do I calculate daily interest?
Daily Interest = (Principal x Annual Rate) / 365. For $10,000 at 5% annual: Daily interest = ($10,000 x 0.05) / 365 = $1.37/day. This is often used for credit cards and savings accounts. Interest accrues daily but may be paid/charged monthly.