📊 APY Calculator
Calculate Annual Percentage Yield and compare interest rates
Calculate APY
Annual Percentage Yield (APY)
Interest Rate (APR)
Year 1 Earnings
Balance After 1 Year
Balance After 5 Years
Growth Comparison by Compounding Frequency
📚 Understanding APY
What is APY?
APY (Annual Percentage Yield) is the effective annual rate of return taking into account the effect of compound interest. It shows the actual amount you'll earn on a deposit in one year.
APY vs APR
APR (Annual Percentage Rate) is the simple interest rate without compounding. APY includes compound interest, which means interest earned on both your principal and previously earned interest. APY is always equal to or greater than APR.
Formula
APY = (1 + r/n)^n - 1
Where r is the interest rate (as decimal) and n is the number of compounding periods per year.
Why Compounding Frequency Matters
The more frequently interest compounds, the higher your APY. For example, a 5% interest rate compounded daily yields more than the same rate compounded monthly or annually. This is because you earn interest on your interest more often.
❓ Frequently Asked Questions
What's the difference between APY and APR?
▼APR (Annual Percentage Rate) is the simple interest rate without considering compounding effects. APY (Annual Percentage Yield) includes the effect of compound interest, showing the actual amount you'll earn in a year. APY is always equal to or higher than APR because it accounts for interest earned on previously earned interest.
How does compounding frequency affect my earnings?
▼The more frequently interest compounds, the more you earn. Daily compounding yields more than monthly, which yields more than annual compounding. For example, a 5% APR compounded daily gives an APY of 5.127%, while the same rate compounded monthly gives 5.116%, and annually gives exactly 5.000%.
Which savings accounts offer the highest APY?
▼High-yield savings accounts and online banks typically offer the highest APYs, often 10-20 times higher than traditional brick-and-mortar banks. As of 2024, competitive high-yield savings accounts offer APYs ranging from 4% to 5.5%. Always compare APY (not just APR) when choosing accounts, and check for minimum balance requirements or fees.
How do I convert APR to APY?
▼Use the formula: APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For daily compounding, n = 365; for monthly, n = 12; for quarterly, n = 4. This calculator does the conversion automatically for you.
Does APY change over time?
▼Yes, APY can change based on market conditions and Federal Reserve interest rate decisions. Variable-rate accounts adjust their APY periodically, while fixed-rate accounts (like CDs) lock in the APY for a specific term. Always check if an account offers a variable or fixed APY before opening it.
Is APY guaranteed?
▼For FDIC-insured savings accounts and CDs, your principal and earned interest (up to $250,000 per depositor per bank) are guaranteed by the federal government. However, the APY rate itself may change for variable-rate accounts. Fixed-rate CDs guarantee the APY for the entire term.