Compound Interest
Interest calculated on an amount that includes previously earned interest.
Compound interest is interest calculated on a balance that includes previously earned interest. Over time, growth can accelerate when interest remains in the account; borrowing can also compound costs when unpaid interest is added to the balance. The actual result depends on rate, timing, fees, taxes, and contract terms.
A compound-interest estimate needs a starting amount, interest rate, compounding schedule, time period, and any regular deposits or withdrawals. A calculator can illustrate a scenario but does not predict a product's return. Variable rates, fees, inflation, missed payments, and changing terms can make outcomes differ from a simplified calculation.
Compare rates using the same convention and check whether a quoted rate is annual, nominal, or effective. For borrowing, review the agreement and consider how long interest accrues and whether payments cover new charges. For saving or investing, future returns and purchasing power are uncertain; treat projections as examples, not guarantees.
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