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Compound Interest Calculator

A = P(1 + r/n)nt

Example: A $1,000 principal at a 5% interest rate compounded monthly for 3 years grows to $1,161.47, earning $161.47 in interest.

Estimate investment growth or standard credit card balances. Select your compounding frequency (daily, monthly, quarterly, or annually) and see results instantly.

Interactive Compound Interest Calculator

Interest Earned $161.47
Total Balance $1,161.47

How Compound Interest Works

In compound interest, the interest earned in each compounding cycle is added back into the principal balance. In the next cycle, interest is calculated based on this larger balance.

A = P × (1 + r/n)n×t

Because your balance grows larger in each period, interest earnings accelerate, leading to compounding exponential returns over long periods.

Compounding Frequency

The number of compounding cycles per year (n) determines how often interest is paid out:

  • Annually (n = 1): Interest paid once per year.
  • Quarterly (n = 4): Interest paid every 3 months.
  • Monthly (n = 12): Interest paid every month (standard savings accounts).
  • Daily (n = 365): Interest paid every single day (highest return).

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Frequently Asked Questions

What is compound interest and the formula?
Compound interest is interest calculated on the initial principal AND on the accumulated interest of previous periods. Formula: A = P(1 + r/n)^(nt), where A = final amount, P = principal, r = annual interest rate (decimal), n = compounding frequency per year, t = time in years. Example: $1,000 at 5% compounded monthly for 3 years = $1,161.47.
How does monthly compounding compare to annual compounding?
Monthly compounding (n=12) yields slightly more than annual compounding (n=1) because interest is added to the principal 12 times per year, so you earn interest on your interest more frequently. The difference is captured by the Annual Percentage Yield (APY): a 5% rate compounded monthly gives an APY of 5.116%, while annual gives exactly 5%.
What is the Rule of 72 for compound interest?
The Rule of 72 estimates how long it takes to double your money: divide 72 by the annual interest rate. At 6% interest: 72 ÷ 6 = 12 years to double. At 8%: 72 ÷ 8 = 9 years. This works best for rates between 4–20%.
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the nominal interest rate without accounting for compounding. APY (Annual Percentage Yield) includes the effect of compounding within the year — it's the effective annual rate. APY = (1 + APR/n)^n - 1. APY is always >= APR and is the more meaningful figure for comparing savings accounts.
How much does $10,000 grow at 7% compound interest over 20 years?
At 7% compounded annually: A = $10,000 × (1.07)^20 = $38,696.84. The investment nearly quadruples. At 7% compounded monthly it grows slightly more to $40,062.20, showing the significant long-term impact of compounding frequency.