APY Calculator

APR is the simple nominal rate before compounding. APY is the effective annual rate after compounding is applied. Because of compounding, APY is always equal to or higher than APR.

Compounding. When interest is credited more than once per year, each period's interest earns interest in later periods. More frequent compounding produces a higher APY.

Daily compounding produces a slightly higher APY at the same nominal rate because interest is credited 365 times per year instead of 12. The difference is usually small.

Banks advertise APY by law because it is the true annualized figure customers actually earn. The nominal APR is what they often divide to calculate the daily or monthly periodic rate.

No. Savings account APYs are variable and can change with the market. A CD, by contrast, locks in a fixed rate for the full term.

Compare the APY, not the nominal rate. Since APY accounts for compounding, comparing APYs between any two products tells you which truly pays more per year.