← A Year on Paper · Lesson 3 of 3
Interest, both ways
Interest works for you on savings and against you on debt. $1,000 saved at 5% a year becomes $1,050 after one year, and $1,102.50 after two, because the second year earns interest on the first year's interest.
On a credit card at 24% a year, an unpaid $1,000 costs about $240 in the first year alone. The same arithmetic, pointing the other way.
$1,000 saved at 5% a year, with the interest left in. How much after two years?
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