Enter your interest rate and compounding frequency to calculate APY
Annual Percentage Yield (APY) is the effective annual rate of return on a deposit, taking compound interest into account. Unlike APR (Annual Percentage Rate), which only reflects the nominal interest rate, APY shows what you actually earn after interest is compounded throughout the year. The more frequently interest compounds, the higher the APY relative to the stated APR.
APY = (1 + r/n)ⁿ − 1
Where r is the nominal interest rate (APR) and n is the number of compounding periods per year.
| Compounding | Periods/year (n) | APY at 5% APR |
|---|---|---|
| Annual | 1 | 5.000% |
| Semi-annual | 2 | 5.063% |
| Quarterly | 4 | 5.095% |
| Monthly | 12 | 5.116% |
| Daily | 365 | 5.127% |
APR is the simple annual interest rate without compounding. APY includes the effect of compounding. For savings accounts, a higher APY means more earnings. For loans, a higher APR means more cost. When comparing savings products, always compare APY, not APR — two accounts with the same APR but different compounding frequencies will produce different actual returns.
APY is most relevant for savings accounts, certificates of deposit (CDs), money market accounts, and high-yield savings accounts. Online banks typically offer higher APYs than traditional brick-and-mortar banks due to lower overhead costs. As of recent years, high-yield savings accounts commonly offer APYs between 4–5%, compared to 0.01–0.1% at traditional banks.
A competitive APY is typically 4–5% for high-yield savings accounts at online banks. Traditional banks often offer 0.01–0.1%. Compare across institutions and check whether the rate is introductory or permanent.
No. The interest rate (APR) is the nominal rate. APY accounts for compounding and shows the actual annual return. APY is always equal to or higher than APR. They are only identical when interest compounds once per year.
APY is not a payment frequency — it is an annualised rate. Interest is typically credited monthly or quarterly, but APY expresses the total annual return including compounding of those periodic payments.
Yes, all else being equal. Daily compounding produces a slightly higher APY than monthly compounding at the same APR. However, the difference becomes negligible at typical savings account rates — the difference between monthly and daily compounding at 5% APR is only 0.011 percentage points.
Yes. Most savings account APYs are variable and can change at the bank's discretion. Only CDs and fixed-rate products lock in an APY for a specified term.