Interest Calculator

Simple vs compound interest, in one view

This calculator answers a question most tools skip: how much of your growth comes from compounding itself? Enter a principal, a rate, and a time period, choose how often interest compounds, and you get both totals — simple interest (interest on the original principal only) and compound interest (interest on principal plus previously earned interest) — along with the difference between them.

The two formulas being compared are:

Simple: A = P(1 + rt)     Compound: A = P(1 + r/n)ⁿᵗ

where n is the number of compounding periods per year. Savings accounts typically compound daily or monthly; bonds often pay simple coupons; loan interest almost always compounds.

Worked example

$5,000 at 5% for 10 years earns $2,500 of simple interest ($7,500 total). Compounded annually it grows to about $8,144; compounded monthly, about $8,235. The "compounding advantage" line shows that switch from simple to monthly compounding is worth roughly $735 — money you earn for doing absolutely nothing differently.

What to notice as you experiment

• Time beats rate. Doubling the time period grows the compound total far more than doubling the rate suggests, because growth stacks on growth.
• Frequency has diminishing returns. Annual → monthly compounding matters; monthly → daily barely moves the needle. Don't pick a bank account on compounding frequency alone.
• It works against you too. Credit card debt compounds the same way — which is why balances feel like they grow faster than they shrink.

Frequently asked questions