Simple interest basically is the amount you borrowed times the interest rate. In other words, 5% interest on $1,000 is $50. If you really believe that all interest rates work like simple interest, you’re going to lose a lot of money.
Most of us don’t want to receive a small amount each year for the interest we earn. Instead, we want to leave the interest earned in the account and let it grow over time.
When interest works for you, it can make you a ton of money. When it works against you, it can cost you big. You need to know how it works to take advantage.
Moral of this status: People wish everything about money was so clear. Take the time to educate yourself and it will be.