APY Calculator
Annual Percentage Yield vs nominal rate
Enter your rate and compound frequency to calculate APY and earnings.
Annual Percentage Yield (APY)
0.00%
Effective annual rate
BreakdownAmount
Nominal Rate (APR)—
APY (effective)—
Rate Difference—
Principal—
Interest Earned—
Final Balance—
vs Simple Interest—
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APY vs APR Explained
APR (Annual Percentage Rate) is the nominal interest rate without accounting for compounding. APY (Annual Percentage Yield) is the effective annual rate after compounding — it's what you actually earn. For savings and CDs, APY is always equal to or higher than APR.
For borrowing (credit cards, loans), APR is the stated cost. The effective rate you pay can be higher due to fees and compounding. This is why comparing APY-to-APY for savings and APR-to-APR for loans gives the most accurate picture.
Daily vs Monthly Compounding
At 5.00% APR: Daily (365x): APY = 5.127%. Monthly (12x): APY = 5.116%. The difference is only 0.011% — on $10,000 that's about $1.10 per year. Compounding frequency matters far less than the rate itself. A 5.00% daily beats a 4.90% monthly by far more than the compounding difference.
The Rule of 72
Divide 72 by the interest rate to estimate how many years to double your money. At 5% APY: 72/5 = 14.4 years to double. At 7%: 72/7 = 10.3 years. At 10%: 72/10 = 7.2 years. For borrowing: at 22% credit card rate: 72/22 = 3.3 years for debt to double if unpaid.
Continuous Compounding
The mathematical limit of compounding infinitely often is e^(r×t). At 5%: e^0.05 - 1 = 5.127%. Identical to daily compounding to 3 decimal places. No consumer product compounds continuously in practice — banks round to the nearest cent daily, which is effectively continuous.
Savings vs Loan APY
For savings: higher compounding frequency = higher effective return (good). For loans: higher compounding frequency = higher effective cost (bad). Credit cards compound daily at 20–29%, making the effective rate higher than the stated APR. This is why credit card balances grow so fast when unpaid.
APY calculations assume no fees, taxes, or changes to principal. Actual earnings depend on balance changes, rate fluctuations, and account-specific terms.
Frequently Asked Questions
What is APY?+
APY stands for Annual Percentage Yield. It's the actual rate of return you earn on a savings account or CD in one year, accounting for compound interest. APY is always equal to or greater than the nominal rate (APR). For savings products, banks are required by Truth in Savings Act to disclose APY — it's the number to compare across institutions.
How is APY calculated?+
APY formula: APY = (1 + r/n)^n - 1, where r = nominal annual rate and n = number of compounding periods per year. Example: 5.00% APR compounded monthly: APY = (1 + 0.05/12)^12 - 1 = (1.004167)^12 - 1 = 5.116%. For daily compounding: (1 + 0.05/365)^365 - 1 = 5.127%.
What is the difference between APR and APY?+
APR (Annual Percentage Rate) is the stated nominal interest rate. APY (Annual Percentage Yield) is the effective annual rate after accounting for compounding. For savings accounts: APY > APR always (except with annual compounding, where they're equal). APY is the number that matters for comparing savings accounts. For loans, lenders use APR to disclose costs — the effective rate you pay may be higher.
How does compound frequency affect earnings?+
More frequent compounding = higher effective yield. On $10,000 at 5.00% APR for 1 year: Annual compounding: $500 interest. Monthly: $511.62. Daily: $512.67. The difference between monthly and daily is only $1.05. The difference between annual and daily is $12.67 — more meaningful. Over longer periods and higher balances, the compounding frequency effect compounds itself.
What APY do savings accounts currently pay?+
As of 2026, top high-yield savings accounts pay 4.5–5.0% APY at online banks (Marcus by Goldman Sachs, Ally Bank, Discover Bank, Capital One 360). Traditional big bank savings accounts pay 0.01–0.5% APY. Credit union accounts vary widely. Rates change with the Federal Reserve's benchmark rate. Check current rates before opening any account.
How do you compare APY across accounts?+
Always compare APY to APY, not APR to APR or APR to APY. Banks advertise APY for savings products as required by law. When comparing: confirm whether rates are promotional (time-limited) or standard, check minimum balance requirements, look for monthly fees that could eat into earnings, verify FDIC or NCUA insurance coverage. A 5.00% APY with a $25,000 minimum is less useful than a 4.85% APY with no minimum if you have less than $25,000.
What is simple interest vs compound interest?+
Simple interest: I = P × r × t. On $10,000 at 5% for 3 years: $1,500 total. Compound interest (annual): $10,000 × 1.05^3 = $11,576 → $1,576 total. The $76 difference is 'interest on interest.' Over longer periods: 10 years at 5%, simple = $5,000 interest; compound = $6,289 — a $1,289 difference. This gap grows dramatically over 20–30 years, which is why investing beats saving for retirement.
How does APY work on a savings account?+
The bank applies your APY to your daily balance. Most HYSAs compound daily and credit interest monthly. If you deposit $10,000 at 5.00% APY daily compounding, you earn approximately $10,000 × 0.05/365 = $1.37 per day. After 30 days: ~$41.10. After a year: ~$512.67 (matches the APY calculation). Adding to the account increases the earning base; withdrawals reduce it.
Is APY guaranteed?+
For CDs: yes — APY is locked for the CD term. For HYSAs and money market accounts: no — APY is variable and changes with the Federal Reserve's benchmark rate. When the Fed cuts rates, HYSA rates typically drop within 1–2 months. When rates were near zero (2020–2022), HYSAs paid 0.5% or less. Always compare current rates; the highest APY advertised today may not be the highest next quarter.
What is the tax treatment of APY earnings?+
Interest earned from savings accounts, CDs, and money market accounts is taxable as ordinary income in the year it's credited, even if you don't withdraw it. Banks send a 1099-INT for accounts earning $10+ in interest. Strategy: hold high-yield savings in a tax-advantaged account (IRA, HSA) to defer or eliminate taxes. Treasury securities (T-bills, I-bonds) pay federal income tax but are exempt from state and local taxes.