A student filling out financial paperwork at her desk.

What is Interest, and Why Does It Matter?

Between adjusting to life in college to staying on top of studies, opening a savings or checking account may be the last thing on your mind as a student. However, there are benefits to opening an account, such as better money management and having a secure place to keep your funds.

Another benefit to opening a checking or banking account? Interest. Discover what your banking account’s interest rate is, and how it can help you work toward your financial goals below with Varsity.

What is Interest?

Savings and checking accounts often include an interest rate. In the broadest definition, interest is both the cost of borrowing money and the profit you earn for saving money. Interest is a concept that can work for or against you at the same time, depending on the situation.

Interest for Savings

When dealing with checking and savings accounts, financial services often offer an interest rate that pays you back a certain percentage of the money that you have stored in them. The higher the interest rate is on your account, the higher your potential earnings can be—all you have to do is have your money sitting in the account.

Interest for Loans

On the other hand, financial services may also charge interest when you borrow money from them. The charge is often a flat rate, so you are charged a percentage of the amount of money that you owe. It is different in every situation, but many financial services commonly pay and charge interest monthly.

Why Interest Matters

In order to fully understand the importance of interest rates, it is crucial to look at them with the “big picture” in mind. On a short-term basis, it may seem like your account’s interest isn’t accumulating quickly; you may only receive or be charged a few extra cents in interest per month, depending on your activity.

Month-to-month, a few cents in your account doesn’t seem impressive. However, over time, a few cents every other month will begin to add up. Any time you deposit money to your savings account, you can gain more interest, continuously growing your funds without a significant amount of effort.

How You Can Use Interest to Your Advantage

Because your account’s interest rate can have a significant impact on your long-term financial standing, it is important to choose a savings or checking account with rates that work in your favor.

Interest rates can change fairly often, so be sure to do your research and discover what options financial services are currently offering for their checking and savings accounts or loans.

Interest also plays an important role outside of your savings or checking account. When it comes to major life investments, such as purchasing a car or taking out student loans for college, you want to make sure that you are locking in a good interest rate.

Why Choosing a Good Interest Rate Matters

Loans for cars, tuition, and other large purchases can take several decades to pay off. That’s why choosing the right interest rate is so important. If you choose a small loan with a high interest rate, you may find yourself far more than what was on the initial price tag.

By finding the best interest rates, you can save yourself a significant amount of money in the long run by paying less interest on your loan.

Trust Varsity for Quality Interest Rates

Before you tackle the task of choosing the most affordable auto loan or student debt payment plan, start with finding a checking or savings account with excellent interest rates. At Varsity, we strive to offer digital banking products designed with students in mind.

Whether you’re ready to open another checking account or your first even savings account, we offer interest rates that work to help you make the most of your hard-earned money. Our checking and savings account options include:

No matter what your financial goals may look like, Varsity is here for all of your student banking needs with excellent interest rates.

Take a look at our rate sheet to find our most recent interest rates. Ready to start enjoying convenient, accessible banking products? Open an account with Varsity today! If you’re currently with another financial institution, you can easily move your account to Varsity with eSwitch2Varsity.

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