Compound Interest Explained

Region: Europe
Oct 15, 2021, 10:00:00 AM Published By Wirex Team

You might have heard that X-Accounts earn compound interest. But what exactly does that mean? Let’s have a look at what compound interest is and how you can get your hands on it.

What is it?

Simply put, compound interest is interest on interest. Thought to have originated in 17th century Italy, the idea is to earn interest on both the money you’ve saved and the interest you’ve earned on that money.

Unlike simple interest (which is calculated only on the amount saved, or the ‘principal’), which does not accrue, compound interest builds exponentially over time.

How does it work?

When interest is compounded, the regular amount of interest you earn on your balance is reinvested, earning you even more interest. So, in a savings account, it allows you to grow your balance faster than you would be able to otherwise.

Let’s take a look at an example.

If you have $1,000 and are offered a simple interest rate of 1% by a bank, you’d have $1,010 after one year.

If that interest was compounded daily, however, you’d get an extra 1/365 of that 1% every day of the year. So, you’d end up with $1,010.05.

Keep this up for a decade, and you’ll have earned $100 in free money. And, of course, the higher your rate, the more you’ll earn.

How can you earn it?

This is where X-Accounts come in. Not only do they offer marketing-leading interest rates of up to 16% AER on select currencies, this interest is compounded daily.

Your earnings are calculated daily and paid weekly. But the longer you leave your money in, the more interest you’ll earn on it. You can check out how much you’ll make in the long term using our handy online calculator.

Need to withdraw your funds? No problem. X-Accounts are all about flexibility - we don’t do minimum amounts or fixed terms. And we don’t charge fees for account set up, maintenance or withdrawals, either.

Open up to 10 X-Accounts for currencies of your choice in the Wirex app today and see what they can do for you.