One calculator for both kinds of interest
Interest comes in two fundamental flavors, and confusing them is expensive. Simple interest is charged or earned only on the original principal — steady, linear, predictable. Compound interest is calculated on principal plus everything earned so far — which is why it powers both long-term wealth building and fast-growing credit-card debt. This calculator handles both, plus regular monthly deposits, and always shows you the other mode's result for comparison so the difference is never abstract.
The two formulas
In both, P is the starting amount and t the years. Simple interest uses the annual rate r directly. Compound interest divides the rate across n compounding periods per year. Monthly deposits are added period by period, each compounding for the time it remains invested.
When each type applies
- Simple: many auto loans, short-term notes, bond coupons, late-payment penalties, and most textbook problems.
- Compound: savings accounts, CDs, all investments with reinvested returns, mortgages and credit cards (against you).
- Not sure? If the product advertises an APY, it's compound. If it advertises a flat "rate for the term," it's probably simple — and worth checking the fine print.
For a deeper look at either flavor, use the dedicated Simple Interest and Compound Interest calculators, which explain each method in full.
Simple or compound: which is your money actually earning?
Check before you assume. Bank savings accounts, CDs and bonds compound — interest is added to your balance and then earns interest itself. Many short-term loans, car deals and “flat rate” offers are quoted on a simple-interest basis instead, which can make a loan look cheaper than a compounding one at the same headline rate. Credit cards sit at the far end: they typically compound daily, which is why balances grow so fast.
The gap widens brutally with time. At 5%, $10,000 becomes $25,000 in 30 years on simple interest — but $43,219 compounded annually. Run both modes above with your real rate and term: the comparison line under the result is the honest price of the difference.
Worked example
Put $10,000 at 5% for 10 years. Simple interest ends at $15,000. Compound interest (yearly) ends at $16,288.95. Same rate, same years — a $1,288.95 difference created entirely by interest earning interest. Extend it to 30 years and the gap explodes: $25,000 simple versus $43,219.42 compound.
How to use this calculator
- Enter your starting amount and the annual rate.
- Enter the number of years.
- Pick simple or compound interest; for compound, choose how often it compounds.
- Add a monthly deposit if you will contribute regularly.
- Check the comparison stats to see what the other interest type would have produced.
A note on deposits and timing
Deposits are modeled at the end of each compounding period — the conservative assumption. In simple mode, deposits earn no interest themselves in this comparison view (several real products differ); the dedicated savings tools model deposit timing month by month if you need that precision.