Why am I never getting charged interest on my credit cards?

Why do you pay interest on previous interest charges on credit cards but not for mortgages?

• If you are charged $10 one month for interest for a balance of $1000 and don't pay anything you will get charged next month for a balance of $1010. It just keeps building like that... How come mortgages are set up differently? For example, if I take out $100,000 at 6% interest, why aren't I charged $500 that first month, and then next month charged on $100,500?

• Answer:

  Both accounts charge interest based on the balance. If you didn't make the mortgage payment, you would be charged interest on $100,500... plus late fees would apply to not making a payment to both the mortgage and the credit card. That mortgage may have a set monthly payment, but the higher the balance (early in the loan) the higher the interest accrued; so much of the set payment goes toward paying off the interest that's accrued since the last payment and the rest reduces the principal. Half way through paying off the mortgage loan, the interest each month is less because the balance is less.