Looking for a simple and compound interest calculator? This free tool gives you simple vs compound interest compared side by side, year by year. Just enter your numbers and press Calculate — results are instant.
Simple interest is worked out only on the original amount, so it grows by the same number of dollars every year. Compound interest is worked out on the growing balance, so the interest itself earns interest and the yearly gain gets bigger over time. Enter the starting amount, the yearly rate and the number of years, then pick simple or compound — the calculator shows both the end balance and the year-by-year table so you can compare them directly.
Example: Initial amount $5,000 · Interest rate 5% per year · 10 years · Compound (yearly)
End Balance: $8,144.47
Simple interest is charged only on the original amount, so it grows by the same dollars every year. Compound interest is charged on the growing balance, so the yearly gain gets bigger over time. In the example, compound interest earns $644.47 more than simple over 10 years.
APY (annual percentage yield) is the effective yearly rate once compounding is included. A 5% rate compounded monthly has an APY slightly above 5%, because the interest earned during the year also earns interest.
Compound, always — your money earns interest on its own interest. Simple interest is mostly used for short-term loans, while savings accounts and investments compound.