The Difference Between Simple Interest and Compound Interest

Simple Interest vs. Compound Interest 

Simple interest is the interest earned only on the principal balance. For instance, if you deposit $100 in an account that earns simple interest annually at a rate of 10 percent, you will earn $10 per year, every year.

Compound interest is the interest you earn on the interest that accrues over time. For instance, if you deposit $100 in an account that earns compound interest annually at a rate of 10 percent, you will earn $10 the first year, then $11, then $12.10, then $13.31 then next year, and so on. This is called exponential growth, and your money will grow at a faster and faster rate each year as long as you keep your money in the account.

Here is a video to break down the difference: 

Have a great day! 

Mallory