APY Calculator

Annual Percentage Yield (APY) is the real rate of return you earn on savings in a year, including the effect of compounding. It's the single most useful number for comparing savings accounts, CDs and other deposit products, because two accounts with the same headline interest rate can pay different amounts depending on how often they compound.

The difference comes down to nominal rate versus effective yield. The nominal rate (sometimes shown as APR on savings) is the stated annual interest before compounding. But if interest is added monthly or daily, you start earning interest on that interest during the year, so your actual return is slightly higher than the nominal rate. APY captures this — it's the effective annual yield after compounding, and it's always equal to or higher than the nominal rate.

The more frequently an account compounds, the higher the APY for a given nominal rate. A 5% nominal rate compounded annually is a 5% APY; compounded monthly it's about 5.12%; compounded daily, about 5.13%. The gaps are small at typical savings rates but grow with higher rates and matter when you're comparing offers closely. This is exactly why regulators require deposit accounts to advertise APY rather than the nominal rate — it puts every account on a level playing field.

APY is the savings counterpart to APR on loans. On borrowing, APR represents the cost; on saving, APY represents the return. When you're comparing a high-yield savings account, a money market account and a CD, comparing their APYs (not their nominal rates) tells you which genuinely pays more. Watch for introductory or promotional APYs that drop after a few months, and remember that variable-rate accounts can change their APY over time.

This calculator converts any nominal rate and compounding frequency into its APY, and can show the annual interest on a balance. Using APY to compare accounts ensures you're judging the true return, not just the advertised rate — a simple habit that helps you earn more on your savings.