Two savers putting aside the same monthly amount can end up at retirement with totals differing by hundreds of thousands of lei. The direct cause: the number of years each one let their money compound. The same mechanism works in reverse for credit. This guide explains the math, concrete examples with real numbers, and how compounding can work for or against you.
Quick answer
Simple interest is calculated on initial capital, compound interest on capital plus previously accumulated interest. Formula: FV = PV × (1 + r/n)^(n×t). The difference between the two grows exponentially with time. For saving it's your best ally over horizons longer than 5 years. For credit (especially revolving cards) it's the most damaging force.
Mathematical formula
FV = future value, PV = initial principal, r = annual rate as decimal, n = compounding periods per year, t = number of years.
Concrete examples
On 47,500 lei at 7% over 10 years: simple interest yields 80,750 lei, compound yields 93,390 lei. Difference 12,640 lei from compounding. Over 40 years: simple 180,500 lei, compound 710,880 lei, difference 530,380 lei.
Working against you in credit
A 24% APR credit card with 4,700 lei owed becomes 5,829 lei after a year if you pay only minimum. Always pay full balance to avoid this trap.
Maria Popescu, former Ziarul Financiar journalist: "In 12 years of financial journalism, the most frequent regret I heard from people over 50 was not starting to save 10-15 years earlier. Compound interest isn't a trick, it's time working for you. The only requirement is to start."