Interest

Interest is the cost of borrowing money or the return earned on deposited funds, typically expressed as a percentage rate. Banks pay interest on savings and charge interest on loans.

Interest can be simple (calculated only on principal) or compound (calculated on principal plus accumulated interest). On your bank statement, interest earned appears as a credit, while interest charged on loans or overdrafts appears as a debit. Statements may show accrued interest that has been earned but not yet paid.

Related Terms

APR

Annual Percentage Rate

APR is the annual rate charged for borrowing or earned through investment, expressed as a percentage...

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...

Compound Interest

Compound interest is interest calculated on both the initial principal and the accumulated interest ...

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