What is the difference between simple and compound interest?
Simple interest accrues only on the principal. At 5% simple interest on $100,000, you earn exactly $5,000 per year every year. Compound interest earns interest on accumulated interest too, growing faster over time. The gap is small for short terms but can reach 1.5–2× over 30 years.
What is the difference between lump sum and monthly payout?
Lump sum accrues interest and pays it all at maturity; monthly payout distributes each month's interest as it accrues — useful for steady cash flow. The total interest is the same for both, but monthly payout has tax withheld each month.
How do I calculate fixed-deposit interest?
CD/fixed-deposit interest = principal × annual rate × (months ÷ 12) on a simple basis. Example: $10,000 at 3.5% for 1 year gives $350 pre-tax, about $273 after a 22% marginal tax rate. Enter principal, rate, and term here to see pre-tax, after-tax, and real value instantly.
How is interest income taxed in the U.S.?
Interest from savings accounts and CDs is reported on Form 1099-INT and taxed as ordinary income at your marginal federal rate (10–37%), plus state tax where applicable. There's usually no automatic withholding (backup withholding of 24% applies only if you don't provide a W-9). Tax-free options like municipal bonds or a Roth IRA are taxed differently — check the product terms before opening.
Which products use simple interest?
Most fixed deposits, recurring deposits, CDs, and MMFs quote interest on a simple basis. Rolling interest back into the same product at maturity creates a compounding effect. Bond coupons are also simple; for recurring deposits, each monthly installment sits for a different period, so the effective yield is below the headline rate.
How much more does compounding earn?
At $100,000 / 5% / 10 years: simple ≈ $150,000 ($50,000 interest), monthly compound ≈ $165,000 ($65,000 interest). Over 30 years: simple ≈ $250,000 vs compound ≈ $448,000 — nearly 2×. Compare instantly using the chart and box on this page.
How much is protected by deposit insurance?
In the U.S., FDIC insurance protects deposits up to $250,000 per depositor, per insured bank, per ownership category (credit unions get the same coverage from the NCUA). Checking, savings, money market deposit accounts, and CDs qualify; investment products like mutual funds, stocks, and bonds are not covered. To protect a larger balance, spread it across separate banks or ownership categories.
Which earns more interest, a deposit or a recurring deposit?
At the same headline rate, a fixed deposit pays more than a recurring deposit. A deposit holds the full amount from day one, while a recurring deposit is paid in monthly, so the average holding period is about half and the effective yield is roughly 55% of the headline rate. Use a deposit for a lump sum, a recurring deposit while you save up.
How do I find the after-tax interest?
Subtract your marginal tax rate from the pre-tax interest. Example: at a 22% rate, $1,000 of pre-tax interest loses $220 in tax, leaving about $780. This calculator applies your entered rate automatically and shows pre-tax, tax, and after-tax amounts separately, so no manual math is needed.
Does inflation make deposits a loss?
If the after-tax deposit rate is below inflation, real purchasing power falls. Example: a 3% deposit has an after-tax rate of about 2.54%, so with 3% inflation the real return is negative. Enter your expected inflation in the field above to see the real value of the maturity amount.