How is monthly compound interest calculated?

Using A = P(1 + r/12)^(12t). The annual rate r is divided by 12 to get a monthly rate, then applied 12 times per year. For example, £5,000 at 4% for 5 years gives approximately £6,104.

What types of accounts use monthly compounding?

Most savings accounts, certificates of deposit (CDs), money market accounts, and many loans use monthly compounding. Mortgages also typically compound monthly, which affects the effective annual rate (EAR).

What is the effective annual rate (EAR)?

The EAR (also called APY) is the actual annual return after accounting for compounding. For 5% compounded monthly, EAR = (1 + 0.05/12)^12 − 1 ≈ 5.116%. This lets you compare accounts with different compounding frequencies.

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Monthly compound interest calculator

Monthly compounding means interest is calculated and added to your balance once per month. Many mortgages, loans, and savings accounts use monthly compounding. Enter your principal, annual interest rate, and term to see your final balance, total interest earned, and a year-by-year breakdown table. All calculations run locally in your browser.

Principal (starting amount)

Annual interest rate (%)

Compound frequency

Time period: 10 years

1 yr50 yrs

Formula: A = P(1 + r/n)^(nt) — where P = principal, r = annual rate, n = compounds/year, t = years

How it works

The compound interest formula is A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate as a decimal, n is the number of compounding periods per year, and t is the number of years. The year-by-year table recalculates each row using this formula with increasing t values. All arithmetic runs in JavaScript in your browser.

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Related operations

For working out a quick percentage of a value, try the percentage calculator. To convert fractional rates into decimals, use the fraction calculator. For tipping or splitting bills based on totals, see the tip calculator.

Frequently asked questions

How is monthly compound interest calculated?: Using A = P(1 + r/12)^(12t). The annual rate r is divided by 12 to get a monthly rate, then applied 12 times per year. For example, £5,000 at 4% for 5 years gives approximately £6,104.
What types of accounts use monthly compounding?: Most savings accounts, certificates of deposit (CDs), money market accounts, and many loans use monthly compounding. Mortgages also typically compound monthly, which affects the effective annual rate (EAR).
What is the effective annual rate (EAR)?: The EAR (also called APY) is the actual annual return after accounting for compounding. For 5% compounded monthly, EAR = (1 + 0.05/12)^12 − 1 ≈ 5.116%. This lets you compare accounts with different compounding frequencies.
Is my data sent to a server?: All calculations run in your browser. Our servers are not involved at any point.

Monthly compound interest calculator

How it works

Processing runs in your browser

Related operations

Frequently asked questions

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