Compound Interest

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It causes money to grow faster than simple interest.

The power of compound interest increases with more frequent compounding. Interest can compound annually, quarterly, monthly, daily, or continuously. APY disclosures capture the compounding effect for savings products.

Related Terms

Interest

Interest is the cost of borrowing money or the return earned on deposited funds, typically expressed...

APY

Annual Percentage Yield

APY is the effective annual rate of return taking into account the effect of compounding interest. I...

Principal

Principal is the original amount of money borrowed in a loan or the original amount invested. It doe...

Savings Account

A savings account is a deposit account that typically earns interest on the balance. It's designed f...

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