Interest Calculator
Compare simple and compound interest side by side and see how compounding frequency changes your total return.
Formula
About this calculator
Interest is the cost of borrowing money — or the reward for lending it — and it comes in two flavors that produce very different results over time. This calculator computes both simple and compound interest on the same inputs so you can see exactly how much the method matters.
Simple interest is calculated only on the original principal: I = P · r · t. It grows in a straight line and is common for short-term loans and some bonds. Compound interest, by contrast, is calculated on the principal plus all previously accumulated interest: A = P(1 + r/n)^(n·t), where n is the number of times interest compounds per year. Because interest earns interest, compound growth curves upward and pulls away from simple interest the longer money is left to grow.
Compounding frequency changes the outcome too. Daily compounding produces slightly more than monthly, which produces more than annual, because interest is added to the balance more often. The difference is small over one year but meaningful over decades, which is why savings accounts advertise their compounding schedule.
Example: $10,000 at 5% for 10 years earns $5,000 in simple interest for a $15,000 balance. With monthly compounding it grows to about $16,470 — roughly $1,470 more, purely from interest earning interest. Over longer horizons or at higher rates, that compounding advantage grows dramatically.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is charged only on the original principal, while compound interest is charged on the principal plus all interest accumulated so far, so compound interest grows faster over time.
Does compounding frequency really matter?
Yes, though the effect is modest. More frequent compounding — daily versus annual — adds interest to the balance more often, producing a slightly higher total that compounds further over long periods.
When is simple interest used?
Simple interest is common on short-term loans, some auto loans, and certain bonds. Most savings accounts, credit cards and long-term investments use compound interest.
How do I earn compound interest?
Leave your money invested so returns are reinvested rather than withdrawn. Savings accounts, CDs, and reinvested dividends or fund returns all compound over time.
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⚠️ Results are estimates for general information. Actual interest earned depends on your account terms, rate changes and how interest is credited.