EachCalculatorInterest Calculator
Calculate simple interest or compound interest on savings, investments, or loans over any time period.
Interest type
Interest Earned
$348.85
Total Amount
$1,348.85
How It Works
Simple interest
Simple interest grows linearly: interest = principal × rate × time. It's only ever calculated on the original principal, never on previously earned interest.
Compound interest
Compound interest is calculated on the principal plus all previously earned interest, so it grows faster the more frequently it compounds (annually, monthly, or daily).
Example Calculation
$1,000 at 6% for 5 years earns $300 in simple interest, but grows to about $1,348 (an extra $48) with monthly compounding over the same period.
Common Mistakes
- Assuming simple and compound interest give the same result — they diverge more the longer the time period.
- Forgetting that more frequent compounding (daily vs. annually) increases the effective return at the same nominal rate.
- Mixing up the annual rate with the per-period rate when compounding more often than once a year.
Frequently Asked Questions
- What's the difference between simple and compound interest?
- Simple interest is only ever calculated on the original principal. Compound interest is calculated on the principal plus all interest earned so far, so it grows faster over time.
- Does compounding frequency really make a big difference?
- At low rates or short time periods the difference is small, but it grows significantly over long time periods or at higher interest rates.
- Which does a savings account typically use?
- Most savings accounts and credit cards use compound interest, usually compounded daily or monthly, while some simple loans use simple interest.