Compound Interest Calculator
Calculate compound interest on investments and savings
Fast, accurate calculations with clear results. Built for speed and ease of use.
Formula
A = P(1 + r/n)^(nt)P = principal, r = rate, n = frequency, t = time
How to Use Compound Interest Calculator
- Enter the required values in the input fields.
- Review the formula and methodology used.
- Check the calculated results below.
- Use the results for your specific needs.
Examples
Compound interest is what turns a savings account, a retirement fund, or a credit card balance into something that grows on itself, because each period's interest gets added to the balance and then earns interest of its own. The more often interest is added, the faster the balance grows, which is why the compounding frequency written into a loan or savings product matters as much as the headline rate.
The formula
A = P(1 + r/n)^(nt)- A
- the final balance after interest
- P
- the principal, the amount you start with
- r
- the annual interest rate written as a decimal (6% = 0.06)
- n
- the number of times interest compounds per year
- t
- the number of years
Worked example
Put $10,000 into an account paying 6% a year, compounded monthly, for 5 years. The monthly rate is 0.06 / 12 = 0.005, and there are 12 x 5 = 60 compounding periods, so the balance is 10000 x (1.005)^60 = $13,488.51, a gain of $3,488.51. Compounding annually instead of monthly on the same 6% rate would have produced only $13,382.26, a difference of over $100 from frequency alone.
What trips people up
- APR and APY are not the same number. APR is the stated annual rate before compounding; APY is what you actually earn once compounding is applied, so a 6% APR compounded monthly is really a 6.17% APY.
- Compounding more often only helps at the margins. Moving from monthly to daily compounding barely changes the result, because the effect shrinks as the periods get shorter.
- The rate and the term must use matching units. If r is annual, t must be in years and n must count periods per year, not per month.
- Fees and taxes are not part of this formula. A savings account advertising 6% APY still loses money to any withdrawal fee or tax on the interest earned.
Frequently asked questions
- What is the difference between APR and APY?
- APR is the stated annual rate before compounding is applied. APY reflects what you actually earn or owe once the compounding in the account is factored in, so APY is always equal to or higher than APR for a positive rate.
- Does more frequent compounding always mean significantly more money?
- It helps, but the gain shrinks fast. Moving from annual to monthly compounding matters; moving from monthly to daily on the same rate barely changes the total, because you are approaching the mathematical limit called continuous compounding.
- Can compound interest work against me?
- Yes, on credit card balances and other compounding debt, the same formula grows what you owe, which is why carrying a balance on a high-rate card compounds quickly if only minimum payments are made.
- How do I compare two accounts with different compounding frequencies?
- Convert both to APY, since that number already accounts for compounding frequency and gives you a fair one-to-one comparison regardless of how often each account compounds.
- What happens if I add or withdraw money partway through the term?
- The formula assumes a single deposit left untouched for the full term t. Any deposit or withdrawal partway through needs the calculation split into separate periods around that change.