 TITLE: Is Credit Card Interest Compounded Daily? CONTENT: What Is Compound Interest?\n--------------------------\nA helpful way to think about compound interest is to compare it with its counterpart—simple interest. Simple interest takes a percentage of the total balance (the annual interest rate), and adds it to what's owed (the principal). For example, with a $100 loan that has a 5% simple annual interest rate and a three-year term, you would ultimately pay back $15 in interest in addition to your $100 principal balance. You might use this type of interest formula to calculate what you owe to a friend after you borrowed money and promised to pay a flat interest rate for it.\nCompound interest, on the other hand, is when you pay interest on the principal _and_ any accrued interest. If you start with a $100 balance on a loan with a 5% interest rate that compounds annually, you'll ultimately pay back $15.76 in interest due to the effect of compounding interest.\nInterest can be compounded daily, monthly or annually. And as it compounds, more interest will accrue and increase the balance you owe.\nCredit card issuers charge interest based on a daily interest rate, which is calculated based on your account's annual percentage rate (APR). You can find your daily interest rate by dividing your APR by 365 (the number of days in a year). The daily interest rate on a card with an APR of 17%, for example, would be about 0.00047%.\nCompounding can be considered a blessing or a curse, depending on the type of account. For the same reason compound interest increases a credit card balance each day, it can also increase the balance of a retirement account you've invested in. In this way, the more frequently investment returns are compounded, the more you'll earn in interest yields. END