Other forms: compound interests
Compound interest is money that's earned or paid not just on an initial investment or loan, but also on the interest that has built up over time.
With simple interest, if you invest $1,000 at a 10 percent annual interest rate for 30 years, you'll earn $100 every year, so after 30 years, you'd have $4,000. With compound interest (calculated annually) over the same period, that $1,000 would end up being $17,449.40 — obviously, a lot more! That's because you'd have earned interest not just on the original amount, but also on all the built-up interest. Compound interest works great if you're the one earning it, but be careful: If you're paying it on credit card debt that keeps accruing interest, you'll end up owing a whole lot more than you borrowed!