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Finance & Banking vocabulary · Interest & Exchange Rates

Compound interest

Meaning in finance & banking, with examples

nounCommon term

In finance & banking, compound interest means: Interest calculated on both the original amount and the interest already added, so the total grows faster over time than with simple interest.

In Turkish: bileşik faiz

How it is used

Used for savings, loans and in finance training. Interest can be compounded daily, monthly or yearly; the more often it is compounded, the higher the effective rate. It is contrasted with simple interest.

Example sentences

  1. Thanks to compound interest, the deposit earned more in the second year than in the first.

  2. Unpaid credit card debt grows quickly because of compound interest.

Common collocations

  • earn compound interest
  • compound interest rate
  • interest compounded monthly
  • simple and compound interest
  • interest rateThe price of borrowing money, shown as a percentage of the amount borrowed or saved for a period, usually one year.
  • APRShort for annual percentage rate: the yearly cost of a loan or credit card shown as a percentage, including interest and certain required fees.
  • savings accountA bank account for keeping money you do not need every day. It pays interest, but it may limit how often or how quickly you can take money out.
  • time depositMoney placed in a bank for a fixed period, such as 32 days or one year, at an agreed interest rate. Taking it out early usually means losing some or all of the interest.

More terms: Interest & Exchange Rates

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This page explains English vocabulary for learners. It is not financial advice.