What is interest in finance?

Interest typically refers to one of two aspects of finance: The money earned when saving or the added cost incurred when borrowing. The two main types of interest are simple interest and compound interest. High interest rates are great for consumers when applied to savings and investments, and low interest rates are more beneficial for borrowers.

What is interest in a bank account?

Interest is like a reward the bank gives you for trusting them to look after your money. The more money you have in your account, and the longer you keep it there, the more interest you can earn. How does interest work? The bank calculates interest as a percentage of the total amount in a bank account.

What does interest mean when saving money?

While saving, interest represents the amount of money your bank pays you in exchange for the use of your deposits. Rates in this case are usually expressed as annual percentage yield (APY), and can vary greatly depending on the financial institution as well as the product.