Your attitude toward credit. People who understand how credit works usually have a constructive attitude. Those who do not, typically head for serious trouble. And when they get there, most do not know how to recover. To understand credit, we need to know about compound interest.
Interest is compound because when added to the principal, interest becomes principal.
Remember, once added, interest becomes principal. Each year, the interest added to our account increases slightly. Or, more exactly, it increases through a geometric progression . That depends on the annual percentage rate. The higher the rate, the faster it grows.