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Learn the difference between simple interest and compound interest.
You've just calculated simple interest, in which you only pay interest on the principal you borrowed. Many credit cards and other loans, however, utilize compound interest, where the interest you owe gathers interest of its own. Compound interest can result in much higher interest over time than simple interest. Calculating compound interest requires a different formula. Here's a side-by-side comparison of the two systems:
Don't forget the principal. When a loan is paid off, the borrower doesn't only have to pay the interest — they must also pay back the principal that was borrowed. The sum of the interest generated plus the principal is also known as the "future value," or the "maturity value" of the loan