Tag Archives: banking basics

Quick Answer: Compound interest is interest calculated on both your original amount, called the principal, and on the interest that has already accumulated, rather than only on the original amount. This means your money earns interest on its own interest, creating growth that accelerates over time rather than staying flat. It matters because it’s the mechanism behind long term savings …

Quick Answer: The interest rate is the base percentage your deposit earns before accounting for compounding, while APY, or Annual Percentage Yield, reflects the total amount you’ll actually earn in a year including the effect of compound interest. Because APY factors in compounding, it’s almost always slightly higher than the stated interest rate on the same account, and it gives …