How interest is calculated can have a great impact on the interest earned by your account and how your savings grow. Compound interest arises when interest is added to the principal and when the interest that has been added also earns interest. You'll see your account balance grow more quickly with accounts that pay interest more frequently. The "Annual Percentage Yield" or APY is the effective annual rate of return once the effect of compounding interest is factored in.
The Benefits of Compounding
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