Compound Interest Calculator

How to use it

Compound interest is interest calculated on both your original principal and on the interest that's already been added to it, so a balance grows faster over time than it would under simple interest, where you only ever earn interest on the original amount. This calculator is the general-purpose version of the other tools here — use it when you want to control the compounding frequency directly, for example when modelling a savings account, a bond, or a scenario that doesn't fit the fixed conventions used by the SIP, lump-sum, or FD calculators. The formula is A = P × (1 + r/n)^(n × t), where P is the principal, r is the annual interest rate as a decimal, n is the number of times interest compounds each year, and t is the number of years. Setting n to 1 compounds annually, 4 compounds quarterly, and 12 compounds monthly — the higher the compounding frequency, the more often interest is added to the balance and starts earning interest itself, producing a slightly higher final amount for the same quoted annual rate. For example, depositing $10,000 at a 6% annual rate for 5 years, compounded monthly (n = 12): the monthly rate is 6% ÷ 12 = 0.5%, compounded over 12 × 5 = 60 months. (1 + 0.005)^60 works out to about 1.3488, so the final amount is $10,000 × 1.3488 ≈ $13,488. Total interest earned is about $3,488 — compare that to the $3,000 you'd earn from simple interest over the same period, and the extra $488 comes purely from monthly compounding. This calculator is useful for understanding how compounding frequency alone changes an outcome — try the same numbers with n = 1, n = 4, and n = 12 to see how much difference monthly versus annual compounding actually makes (usually less than people expect, unless the rate or time period is large). It's also a good way to sanity-check numbers from a bank statement, a bond prospectus, or another calculator that doesn't show its compounding assumption. As always, this is a projection based on the rate you enter, not a guaranteed outcome.

Frequently asked questions

What is compound interest?

Compound interest is interest earned on both your original principal and on interest that's already been credited to your balance, rather than only on the original amount. Because each period's interest becomes part of the base for the next period, growth accelerates over time — the longer the money compounds, the bigger the gap between compound and simple interest becomes.

How does compounding frequency affect returns?

More frequent compounding produces a higher final amount for the same quoted annual rate, because interest is added to the balance sooner and starts earning interest itself. The difference between annual and monthly compounding is usually small for short periods or low rates, but it grows for longer time periods and higher rates — which is why the fine print on savings products always states the compounding frequency.

What's the difference between compound interest and a SIP?

Compound interest describes how a single amount grows over time — this calculator assumes you deposit the principal once and add nothing more. A SIP calculator instead models regular new contributions, usually monthly, on top of the compounding already happening. Use this one for a single deposit, and the SIP calculator for ongoing contributions.

Why doesn't my bank's quoted rate match this calculator?

Banks sometimes quote a nominal annual rate without stating the compounding frequency, or use the effective annual rate (EAR), which already accounts for compounding. If your result doesn't match your bank statement, check whether the quoted rate is nominal or effective, and confirm the compounding frequency (monthly, quarterly, or daily) — small mismatches here explain most discrepancies.