How do I generate compound interest?
if i was a credit card company.
Would that even make sense?
Definition: Compound interest always pays more for each percentage point of original interest than does a straight interest.
- regeruggedLv 71 decade agoFavorite Answer
If you have a savings account, compound interest is figured daily. So a 5% annual percentage rate might work out to 5.18% of the amount of the original investment.
For credit card companies, interest owed on unpaid balances is figured daily. So, an advertised rate of 18% might be slightly higher. But it is difficult to estimate. If you borrow money at the beginning of the year, you have to make monthly payments, so you cannot look it like you do savings. For the loan, the 18% applies to the unpaid balance, so the amount of interest paid keeps getting smaller.