# Interest on interest?

Question, do you earn interest on money you’ve got through interest?

i.e.
Month 1, £10,000 in the account, you earn approx £38.33 interest (£10k x 4.6% / 12)

Month 2, is interest calculated off the £10,038.33, or just the £10,000?

Be glad of someone’s help on this.

The former.

Google and have a look for “compounding interest” and the benefits it brings.

Yes there’s two types of interest.

Simple Vs Compound

With compound interest it’ll be using the new total £10,038.33 in month 2

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Yes, but you only need to do the maths yourself if you’re looking at the gross interest figure. The AER interest figure already takes the compounding effect into account. AER (annual equivalent rate) tells you how much interest you would earn in a year if you left your original deposit amount and all the accumulated interest in the account for a year, taking into account compounding. It enables you to directly compare different accounts that pay interest at different intervals.