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Interest is the cost you pay for borrowing money—and it’s the money you earn from certain investments. Learn how interest works in the MoneySense Glossary.
Interest is the rate lenders charge borrowers for the use of their money, typically expressed as an annual percentage. Investments like bonds and guaranteed investment certificates (GICs) pay interest because investors are essentially lending money to the issuers, whereas if you borrow money using financial products such as loans and credit cards, you pay interest to the lenders.
Example: “If you see ads promising high interest rates on savings accounts, always read the fine print. Often, these are short-term promotional rates that last only a few months.”
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