Compounding Interest vs. Simple Interest
June 13th, 2007If you’ve never heard of compounding or simple interest, you should take a minute to read this post. For those who have credit cards, take time to understand what the credit card companies are charging you on a monthly basis.
Compounding interest is interest that can be added to your principal balance. The interest that is added to your principal is now a part of the original principal that you owe. Then, next month, you end up paying interest on top of the interest you paid the previous month. Most, if not all credit cards are calculated this way. Isn’t this great!…Not only are credit card companies charging outrageous fees, but they’ve designed the repayment plan so that you won’t be able to pay off your credit cards.
Simple interest is usually predictable. You can find simple interest applied to most installment credit such as auto loans, mortgages, and student loans. This type of interest is not only better for your wallet, but also better for your credit.
June 23rd, 2007 at 6:00 am
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January 11th, 2008 at 3:55 am
Your blog was too good! Really, I was unaware of about the aspects of compounding interest. Your information is a real revelation. Now I know why I always end up paying extra bucks on my credit card. Thanks again!