Ask The Piggy Bank: What is Compound Interest?

I recently received this question from an interested reader:
What is compound interest?
This is a great question that takes us back to Money 101.
Compound interest is an interest charge on both the principal of a loan and the interest. This means that the interest charge is added to the balance of the loan, and you are charged interest on both. (Simple interest, by contrast, is charged only on the principal of the loan.)
One of the reasons that credit card debt is so hard to pay off is that it works on compound interest. Not only that, but credit card interest charges …read more