How is interest calculated?

For most deposits, the interest is compounded. The ending balance at maturity is the result of multiplying the deposited amount by (1 + r/n) to the nth power times t, where r is the annual interest rate, n is the number of compounding periods per year and t is the time in years that the money has been invested. The earned interest is the difference between the ending balance and the original deposit.

What is the difference between interest rate and annual percentage yield (APY)?

The rate is the annual percentage yield (APY) advertised. The APY takes into account the effects of compounding interest so it can be slightly higher than the stated rate if interest is compounded more often than annually. Comparing accounts by their APY gives you a fair comparison of which account offers the highest return.

Does the actual return change depending on how often interest is compounded?

Yes, usually the difference is small but it does exist. With daily or monthly compounding interest, the interest gets added to your ending balance more often so that you can earn a little bit more than with annual compounding if the stated rate of interest is the same. The effective annual rate shown reflects this difference.

Are interest on deposits taxed?

In most regions interest is considered taxable income and some banks will deduct the tax directly from the interest paid. If you enable the "taxes" option and enter a tax rate, then you can see how much interest remains after taxes are deducted. This amount is more representative of the actual money that you receive.

Can I calculate what interest rates or terms are required to achieve a particular goal?

Yes. Leave either the interest rate or term blank and enter your deposit amount and desired ending balance. The calculator will then ask for the missing information and show you what conditions are required to meet your goal.

Deposit Interest Calculator

Your deposit

Initial deposit

Annual interest rate

Term (years)

Maturity balance

Compounding frequency

Dropdown list for Compounding Frequency

Add regular deposits or withdrawals

Model money you pay in or take out on its own schedule.

Adjust for inflation

Show the balance in today's money.

Apply tax on interest

Estimate what you keep after tax on the interest.

Fill in any three of initial deposit, interest rate, term, and maturity balance. The calculator solves for the one you leave blank.

Please input values into the fields

Charts and schedule

The interest calculator tool allows you to determine how much interest you will earn if you deposit money into an account that pays interest. Enter the amount of your initial deposit, annual interest rate and length of time to calculate the interest earned and ending balance. You can also add in regular additional deposits, factor in inflation or include taxes on the interest in the calculation.

What are interest rates?

Interest is the money that banks or credit unions pay you for depositing cash with them, as a reward. Most savings accounts, fixed deposits, and certificates of deposit (CDs) earn interest. The interest is added to your account balance at each compounding period, so in the next period you'll earn interest on the higher account balance. Over time it's this "snowball effect" that makes the difference between putting money away or keeping it under your mattress.

How to use this calculator:

The tool offers three fields: deposit amount, annual interest rate and term in years. Select the frequency of compounding for your account to see instantly how much interest you'll earn and what your ending balance will be. Enable additional options if desired. Add fixed accounts to customize your savings goals to fit your lifestyle, plans and deposit schedule. If you enable inflation, you can see how much your future account balance is really worth. Applying a tax rate allows you to estimate how much of the interest you'll have available after some goes to the IRS. It's also possible to work backwards: Leave one of the values (deposit amount, interest rate or term) blank and enter the remaining two values as well as the target ending balance. The tool will then calculate the missing value for you.

Formula for calculating interest.

The formula used to calculate the final capital of savings plans with compound interest is as follows:

A = P\left(1 + \frac{r}{n}\right)^{nt}

A is the final capital, P is the original capital, r is the annual interest rate as a decimal, n is the number of times that interest is compounded per year and t is the length of time in years. The resulting interest earned will be the difference between the final amount of money and the initial deposit.

I = A - P

Suppose you invest $10,000, the interest rate is 4% per year (stated as a percentage), the compounding period is monthly and the length of time is 5 years. In this case r = 0.04, n = 12, and t = 5.

A = 10{,}000\left(1 + \frac{0.04}{12}\right)^{12 \times 5} \approx 12{,}209.97

Thus the interest earned is approximately $2,209.97. If a certain amount of money is deposited each period on top of that, those additional deposits are a type of retirement savings which will grow through compound interest over time while they remain in the account.

Comparison of Simple and Compound Interest:

With simple interest, the interest is only calculated on the original principal amount invested, leading to linear growth. With compound interest, the interest is calculated both on the capital invested and also on any previously earned interest, leading to exponential growth. For the same rate of interest and length of time, the result with compound interest will always be higher, and the longer the investment is held, the greater the difference. The results section shows side by side the values for simple and compound interest so you can check out the difference using your own amounts.

Below is what each field means, with the figures used in the deposit above.

Symbol	Meaning	Example
P	Initial deposit	10,000
r	Annual interest rate	4 percent
n	Compounding periods per year	12
t	Term in years	5
A	Maturity balance	12,209.97
I	Interest earned	2,209.97

Purpose of the interest calculator tool:

It answers questions about daily savings. You can compare two accounts with different interest rates and compounding methods to see which account will give you the highest payout. You can investigate whether a fixed deposit account is better than keeping cash in an account that allows withdrawals at any time. You can calculate what rate of interest would be required to reach a particular savings goal by a certain date, or how long it will take for a sum to double. Since all options eventually lead to one single interest amount and one single account balance, you can display the different options side-by-side and compare them individually.

Tips for creating realistic estimates:

Use the account's stated annual interest rate and actual compounding frequency. Even if the advertised rate is the same, monthly or daily compounding will earn slightly more than annual compounding. The effective annual rate shown is usually called APY (annual percentage yield) and reflects the effect of compounding, allowing for a fair comparison between accounts. Note that interest is generally taxable, so after-tax figures are what's left in your account. For long-term investments, also consider the inflation-adjusted balance since purchasing power matters more than raw numbers.

This calculator is for educational and planning purposes only and does not constitute financial advice. Interest rates, tax laws and account terms can vary so actual results may differ from the example shown depending on which account you choose. Check with your bank for exact details before deciding to deposit.

Frequently asked questions

How is interest calculated?: For most deposits, the interest is compounded. The ending balance at maturity is the result of multiplying the deposited amount by (1 + r/n) to the nth power times t, where r is the annual interest rate, n is the number of compounding periods per year and t is the time in years that the money has been invested. The earned interest is the difference between the ending balance and the original deposit.
What is the difference between interest rate and annual percentage yield (APY)?: The rate is the annual percentage yield (APY) advertised. The APY takes into account the effects of compounding interest so it can be slightly higher than the stated rate if interest is compounded more often than annually. Comparing accounts by their APY gives you a fair comparison of which account offers the highest return.
Does the actual return change depending on how often interest is compounded?: Yes, usually the difference is small but it does exist. With daily or monthly compounding interest, the interest gets added to your ending balance more often so that you can earn a little bit more than with annual compounding if the stated rate of interest is the same. The effective annual rate shown reflects this difference.
Are interest on deposits taxed?: In most regions interest is considered taxable income and some banks will deduct the tax directly from the interest paid. If you enable the "taxes" option and enter a tax rate, then you can see how much interest remains after taxes are deducted. This amount is more representative of the actual money that you receive.
Can I calculate what interest rates or terms are required to achieve a particular goal?: Yes. Leave either the interest rate or term blank and enter your deposit amount and desired ending balance. The calculator will then ask for the missing information and show you what conditions are required to meet your goal.

Related calculators

Compound Interest CalculatorCalculate compound interest and the future value of a deposit, with optional regular contributions, any compounding frequency, the effective annual rate (APY), a simple-versus-compound comparison, a growth chart, and a year-by-year table. Works in reverse to solve for the rate, time, or starting amount.

Simple Interest CalculatorCalculate simple interest and the total repayment from a principal, rate, and term, solve for any missing value, and compare it against compound interest.

Annual Interest Rate CalculatorFind the annual interest rate on a loan or investment from the principal, final amount, and time. Solve for any variable under simple, compound, or continuous interest, and see the effective rate (APY).

Savings CalculatorProject how a savings account grows with an initial deposit, regular contributions, and compound interest. Adjust for tax and inflation, and solve for the deposit, rate, time, or savings goal.

Interest Coverage Ratio CalculatorCalculate the interest coverage ratio from EBIT and interest expense, or solve for either figure. Adds the interest and cushion share of EBIT, EBITDA and EBITDA-less-Capex coverage, a target planner, and industry benchmarks.

Future Value CalculatorProject the future value of an investment with compound interest, regular deposits or withdrawals, inflation adjustment, tax on gains, and reverse solving.

Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

Investor.gov: Compound Interest Calculator and Saving Basics
U.S. SEC explainer on compounding and saving.
Consumer Financial Protection Bureau: What is a certificate of deposit (CD)?
How fixed-term deposit accounts and their interest work.