Compound Interest Calculator

Simple interest is calculated only on the original principal every period. Compound interest is calculated on the principal plus all interest already earned, so your balance grows faster over time. On a $10,000 balance at 6% for 20 years, simple interest produces $12,000 in interest while annual compounding produces about $22,071 -- nearly double.

Most high-yield savings accounts and money market accounts compound daily or monthly. CDs typically compound daily or quarterly. The more frequently interest compounds, the more you earn, though the difference between daily and monthly compounding is small. Annual compounding, common in simple bonds, produces noticeably less than daily compounding over long periods.

The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes for an investment to double. At 6% annual return, your money doubles in roughly 72 / 6 = 12 years. At 9%, it doubles in about 8 years. It is an approximation based on the math of compound growth and is accurate to within about 1% for rates between 6% and 10%.

Yes -- compound interest works both for savers and against borrowers. Credit card balances compound daily at rates of 20-30%, which means unpaid balances grow rapidly. A $5,000 credit card balance at 24% APR that you only pay the 2% minimum on will take over 20 years to pay off and cost more than $7,000 in interest. Paying more than the minimum every month dramatically reduces total interest paid.