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WHAT IS AN INTEREST RATE?
An interest rate is a percent of an amount of money. This percent is set by the bank. An interest rate shows you how much interest you get on your money. Interest means different things if you want to store money than if you want to borrow money.
INTEREST FOR PEOPLE WHO WANT TO STORE MONEY
When you store money, interest is the reward you get for storing money in the bank. The interest is the money you get back as extra on top of the amount you stored. Imagine you store $100 and the interest is $5. You then get $105 when you take your money back.
INTEREST FOR PEOPLE WHO WANT TO BORROW MONEY
When you borrow money, interest is the fee you pay the bank for borrowing money from them. The interest is the amount you pay back on top of the amount you borrowed. Imagine you borrow $100 and the interest is $5. You then pay $105 when you pay the loan back.
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