Calculate simple and compound interest for any savings account, loan, or investment. Compare both methods side by side.
| Method | Interest | Final balance |
|---|
Simple interest is calculated only on the original principal: I = P × r × t. Used for short-term loans, some bonds, and personal loans.
Compound interest earns interest on interest: A = P(1 + r/n)^(nt). Used for savings accounts, term deposits, and most investments.
| Product | Rate (est.) |
|---|---|
| RBA cash rate | ~4.10% p.a. |
| High-interest savings (online) | 4.5–5.5% |
| Term deposit (12 months) | 4.75–5.25% |
| Personal loan | 8–18% |
| Credit card | ~20.49% |
Interest is the cost of money — either what you earn for lending money (savings/investments) or what you pay for borrowing it (loans/credit cards). Understanding the difference between interest types and how they are calculated helps you make better decisions about both savings and debt.
| Type | Formula | Used For | Effect |
|---|---|---|---|
| Simple interest | I = P × r × t | Short-term loans, some bonds | Linear growth |
| Compound interest | A = P(1 + r/n)^(nt) | Mortgages, savings, investments | Exponential growth |
| Amortising interest | Monthly: P×r/12 on outstanding balance | Home loans, personal loans | Declining interest component |
| Product | Typical Rate | $20,000 Annual Interest |
|---|---|---|
| High-interest savings account | 5.0–5.2% earned | $1,000–$1,040 earned |
| Term deposit (12 months) | 4.9–5.4% earned | $980–$1,080 earned |
| Variable home loan | 6.3–7.0% paid | $1,260–$1,400 paid |
| Personal loan (unsecured) | 9–17% paid | $1,800–$3,400 paid |
| Credit card | 17–23% paid | $3,400–$4,600 paid |
What is the current interest rate in Australia?
The RBA cash rate is 4.35% as of June 2026, following three increases in early 2026. This directly influences variable home loan rates (currently 6.3-7.0% p.a.), savings account rates (5.0-5.2% p.a. for competitive accounts), and term deposit rates (4.9-5.5% p.a.).
What is the difference between nominal and effective interest rates?
The nominal rate is the stated annual rate (e.g. 6% p.a.). The effective annual rate accounts for compounding frequency and shows the true annual return or cost. A 6% nominal rate compounded monthly has an effective rate of 6.168% (because monthly compounding at 0.5% per month compounds to slightly more than 6% annually).
How do I calculate interest on a savings account?
Most Australian savings accounts calculate interest daily and credit it monthly. Daily interest = Balance × (Annual rate ÷ 365). For a $10,000 balance at 5% p.a.: daily interest = $10,000 × (0.05 ÷ 365) = $1.37 per day. Over 30 days: approximately $41 in interest that month.