Compound Interest Calculator – How Much Will I Earn? - MoneyRates.com

How much do you have to gain by shopping for a better interest rate?
The answer might be more than you think.
On their own, bank interest rates generally look pretty small. It’s only when you apply them to the size of your deposits and calculate how those deposits can grow over time that you see how it all adds up in real dollars.
A key to this growth is compound interest rate calculator.
The impact of interest rates increases over time because of compounding. This means that over time, you earn interest not just on the amount you deposited, but on the interest you earned previously.
The compound interest calculator below shows how these amounts can grow your money over time.

Compound Interest Calculator

Compound Frequency: ? How often you would like to contribute to your account. X

Daily Monthly Semi-Annually Annually

 
Earned Interest
$0

Total Balance
$0

Make your money work for you!

Save more Faster.Compare these banks to find a better APY.

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Here are some step-by-step instructions for how to use this calculator:
There are four input boxes in the compound interest calculator. Simply enter your information and hit Tab to jump to the next field. Here’s what to enter:
1. Your initial deposit:
Enter the amount you have available to save at the beginning. Don’t bother with dollar signs or commas – the calculator will take care of those automatically.
2. Years to save
Enter the number of years you will keep that money on deposit in your account.
3. Estimated rate of return.
Enter the interest rate on your current bank account or one you are considering. Once you enter a deposit amount, the calculator will display some featured bank offers. You can click on one of these so the calculator will automatically show how their interest rate will grow your money, or you can enter a rate yourself.
4. How often is interest compounded?
Select a compounding frequency from the menu: Daily, Monthly, Semi-Annually, or Annually. Note that if you are entering an APY rather than a simple interest rate, choose “Annually” because APY already accounts for the frequency of compounding.
Your results:
When you click on the Calculate button, your results display immediately below. The amount is how much money you will have at the end of the period you selected. However, this does not take into account the effect of any fees in the account. Be sure to check the fee schedule carefully before signing on for any account.
When an account earns interest and that interest is left in the account, the interest earned previously begins to earn interest itself. Here’s a simple example:
Note that even though the interest rate remained the same, the account earned more in the second period. That’s because it earned interest on both the original investment and on the interest that had been earned in the initial period.
This process of earning interest on interest is known as compounding. It makes a big difference in how investments grow over time, and the longer you stay invested, the more compounding helps you.
Because of compounding, there are four factors that determine how much interest your savings will earn:
Compounding frequency refers to how often the bank credits interest to your account so you can start earning additional interest on the interest already earned.
If an account is compounded daily, it means that if you earn interest one day that interest starts earning interest the very next day, this is daily compound interest.
If an account is compounded monthly or annually, it will take a little longer for the interest you’ve already earned to start earning additional interest.
Because of compounding, the amount of interest you earn can be more than the interest rate times the amount invested.
If you simply apply the interest rate to the amount invested, it assumes that no compounding takes place during the year. However, if the account compounds interest more frequently than annually, it should yield additional interest due to the effect of compounding.
When the amount of interest produced each year after accounting for compounding is measured as a percentage of the amount invested, it is referred to as the annual percentage yield, or APY.
How often an account compounds interest makes a subtle difference, but over time every little bit matters. That’s why you should always compare APYs rather than simple interest rates, because APY includes the impact of how frequently the account compounds interest.
APY is very important when shopping for deposit accounts, but it is not the only factor you should look at.
Here are three other factors to consider when choosing a deposit account:
Make sure the account you’re considering is covered by federally-backed insurance – either through an FDIC-member bank or an NCUA-member credit union. Not all cash management products are eligible for this kind of federal insurance.
Some interest rates are not as good as they look, because you have to pay a regular fee in order to get that interest rate. Be sure to check on how much of the interest you earn will be offset by fees. In some cases, fees can wipe out all the interest you earn.
CDs generally offer higher interest rates than savings and money market accounts. Just be sure you are prepared to leave your money in the CD for the entire term of that CD, or you will probably have to pay an early withdrawal penalty.
Some banks apply different interest rates to different sizes of deposits. One promotional trick is to offer a great interest rate but only on a very limited amount of money. With that kind of rate tier, unless you are only making a small deposit, the rate you earn may not be as good as the rate that bank is advertising.
Before you start comparing APYs and fees on deposit accounts, you need to decide what type of account you want.
Money market accounts and savings accounts have very similar characteristics. Each one produces interest and allows you to withdraw your money at any time (though a few days’ notice might be required in some cases).
So, you can use money market accounts and savings accounts in much the same way. You can compare both types of accounts to each other and choose according to which has the best APY with no fees and a minimum balance requirement you can easily meet.
CDs are different. They typically require you to lock in your money for a specific amount of time, in return for which they usually pay higher rates than money market or savings accounts.
So, a key factor in your decision is when you expect to need the money. If you’re confident you won’t need to withdraw the money for several months or even a few years, you can commit to a CD in order to earn a higher interest rate.
Since savings and money market accounts can be used in much the same way as one another, you can consider both types of account and choose according to factors such as:
This means making sure the money is deposited in an eligible account at an FDIC-insured bank or an NCUA-insured credit union. Remember, this insurance is limited to $250,000 of your total deposits at any one financial institution.
Some accounts have different requirements for how much you need to start an account and how much of a balance you have to keep in the account. Focus your attention on accounts with requirements your deposit will be able to meet.
Compare money market and savings account rates on the MoneyRates.com rates page, or start by looking at a few selected accounts displayed at the end of this section.
See if the account has different rate tiers that will affect how much your money will earn.
These fees diminish or can even wipe out the interest you earn, so avoid them when choosing a savings or money market account.
If you decide you are willing to commit to a CD in order to earn more interest, here are some things that should factor into your choice:
Like savings and money market accounts, CDs are eligible for deposit insurance. This only applies if your money is deposited in an eligible account at an FDIC-insured bank or an NCUA-insured credit union. Again, this insurance is limited to $250,000 of your total deposits at any one financial institution.
Some CD offers only apply to certain account sizes, so focus your search on offers that apply to the amount you want to deposit.
The interest rate on a CD is typically locked in for the full term of the CD. That makes rate shopping especially important when choosing a CD. You can find CD offers on the MoneyRates.com CD rate page, or you can start by looking at a few selected accounts in the table at the end of this article.
You shouldn’t choose a CD if you’re likely to need to take any money out before the CD’s term is up. Just in case though, if the APYs of two CDs are fairly similar you can compare early withdrawal fees. Seeing which has the lower early withdrawal fee could be the tie breaker.
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