Interest Calculator

Simple interest is paid only on the original amount you deposited, so it earns the same number of dollars every year. Compound interest is paid on the original amount plus all the interest already credited, so each period starts from a larger balance and earns slightly more than the one before. Over ten years at 5%, $10,000 earns $5,000 as simple interest but $6,470.09 compounded monthly — the extra $1,470.09 is interest earning interest.

Regulation DD defines the interest rate as the annual rate "which does not reflect compounding" (12 CFR 1030.2(o)). APY, the annual percentage yield, does reflect it. A 5% rate compounded monthly is a 5.1162% APY. Because APY folds compounding in, it is the number that lets you compare two accounts fairly, and it is the figure US banks are legally required to disclose when they advertise a deposit account.

Less than most people expect. A 5% rate yields 5.0000% compounded annually, 5.0625% semiannually, 5.0945% quarterly, 5.1162% monthly and 5.1267% daily. Moving from annual to daily compounding adds about 0.13 percentage points. The gap between daily and monthly is about one hundredth of a point — far smaller than the difference between two banks’ rates, which is where your attention is better spent.

No — it grows a single lump sum, which keeps its answer exact and easy to check. If you are adding money every month, use the compound interest calculator, which models a starting balance plus recurring contributions. If you want to solve for the rate instead of the balance, use the interest rate calculator.

IRS Publication 550 treats interest as ordinary income, taxable in the year it is credited. This calculator applies your marginal rate once, to the total interest at the end of the term. That slightly overstates the final balance compared with paying tax annually out of the account, because in reality the tax dollars leave the balance each year and stop compounding. Set the tax rate to 0 for an IRA, 401(k) or other tax-deferred account.

Regulation DD's Appendix A general rule annualises using a fixed 365-day numerator, and a footnote to that appendix permits institutions to keep using 365 days even in a leap year. Following the regulation keeps the yields this page reports directly comparable to the APY a US bank prints in its disclosures.

Yes, for a debt where nothing is repaid until the end — a balance that simply accrues. Choose simple interest for a debt that does not compound, which is how 31 CFR 901.9 requires interest on delinquent federal debts to be computed. For a loan you repay in instalments, the amortization calculator or the loan calculator is the right tool, because part of every payment reduces the principal that future interest is charged on.

Usually the day count or the balance method. Banks may credit interest on the daily balance or the average daily balance (12 CFR 1030.7), may use 360- or 366-day years, and round to the cent every single day rather than once at the end. Those choices move the result by a few cents on a typical balance. Regulation DD also allows a disclosed APY to be rounded to two decimal places, which absorbs small differences of exactly this kind.