Our pick for earning compound interest: Axos Bank High Yield Savings
- Monthly fees: $0
- Interest compounded daily
- Free ATM card upon request
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To see the strongest returns on your savings, you need to compare more than just interest rates. How and when an account pays you interest can greatly affect your savings potential. Compound interest is a magical tool: The more frequently your balance earns interest, the more quickly your savings grows.
Compound interest is among the best ways to make your money work harder for you, helping you to reach your savings goals more quickly. Compounding can increase a small amount of money today into a large balance over 10, 20 or more years.
And you don’t need to be an investor to take advantage of it — anyone who can put away money can benefit from compound interest.
To get the most out of compound interest, deposit as much as you can into your account and limit any withdrawals from it, whether for bills or fun money. The more that’s in your account at the end of the month, the more interest you’ll earn.
Even if you can’t deposit extra money into your account, your balance continues to grow as your interest compounds each month.
To get the most out of an account with compound interest, save as early as possible and avoid unnecessary withdrawals.
The more frequently your interest compounds, the quicker your money will grow. There are generally four types of compounding interest:
Want to see how much you could earn with daily compound interest? Use a compound interest calculator to estimate your savings growth.
Compound interest is an incredible benefit. But it’s only one element to consider when shopping for a savings account.
In the context of lending, interest is the cost of borrowing money. When you take out a loan, you typically pay interest as a percentage of the principal amount at an agreed rate.
When it comes to savings accounts or investments, interest is the money you earn for allowing the bank, credit union or other financial institution access to your money. When you deposit your money into an interest-bearing account, you’re effectively lending money to the bank. Pooling together its members money is how banks and other lenders provide loans to borrowers, among other banking activities.
Many factors play into the amount of interest you ultimately receive, including:
The interest rate is often expressed as an annual percentage. The higher the interest rate you’re offered, the stronger your return.Back to top
Your provider should prominently advertise the monthly variable interest rate under the product description for the particular account you’re looking at. It’s how they entice you to do business with them, and not a competitor.
If you’re not sure where to start, read our comprehensive guide to interest rates to see popular high-interest savings accounts. Note that interest rate are often variable, meaning they can change according to the federal interest rate.
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