noun

compound interest

interest calculated on both principal and accumulated interest

In more detail

interest that is calculated not only on the original amount of money but also on all the interest that has been added to it

Examples

With compound interest, your savings grow faster because you earn interest on your interest.

How to use compound interest

Compound interest is a financial concept commonly used in banking, investment, and personal finance contexts. It refers to the exponential growth of money when interest is calculated on both the principal and previously earned interest, making it more favorable than simple interest. The term is typically used in formal or technical discussions about savings, loans, and investments.

Common phrases

earn compound interest
compound interest accumulates
compound interest over time
benefit from compound interest
compound interest calculator

Synonyms

accruing interest · interest on interest · accumulated interest

Opposites

simple interest

Word family

compound (verb/adjective) · compounding (noun/verb form)

A common mistake

Learners sometimes confuse compound interest with simple interest, or assume that compound interest applies to all accounts automatically without understanding that the compounding frequency (daily, monthly, annually) significantly affects the final amount.

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