Definition: Payment in exchange for the use of money over time. You can earn interest by lending your money to a bank. In addition, you pay interest when you borrow money from a bank. The rate of payment can either be fixed or variable throughout the life of the loan or deposit.
Examples:
- When you open a savings account at a bank, the bank will pay you to keep your money on deposit at their bank. Interest is the payment you receive.
- When you take out a mortgage to purchase a house, you will pay interest to the bank for the use of the money.
