What Is Compound Interest?
From the SB Advisors Academy money glossary · Free, no signup
Interest calculated on both the original principal and the interest already earned or owed. It works powerfully for saving but works against you in debt.
A worked example
$1,000 at 10% compound interest becomes $1,100 after year one and $1,210 after year two because interest in year two is calculated on $1,100 not $1,000.
Category
Part of the "Credit and Debt" group in the money glossary.