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APY calculator
Annual Percentage Yield converts a nominal interest rate to the effective annual return accounting for compounding. Calculate APY growth on any savings product.
APY vs APR — the key difference
Both are annual rates. The difference is compounding:
- APR (Annual Percentage Rate): nominal rate, ignores intra-year compounding. Used for loans (legally required disclosure).
- APY (Annual Percentage Yield): effective rate, includes compounding. Used for savings products.
Example: 5% APR compounded daily = 5.13% APY. The APY is what you actually earn — always compare savings products on APY.
APY formula
APY = (1 + r/n)^n − 1 r = nominal annual rate (APR) n = compounding periods per year (365 daily, 12 monthly)
Examples at 5% nominal:
- Annual compounding: 5.00% APY
- Monthly compounding: 5.12% APY
- Daily compounding: 5.13% APY
- Continuous compounding: 5.13% APY (e^0.05 − 1)
When APY matters most
On short-term and small amounts, the APY-vs-APR gap is negligible. On large balances over years it adds up. $100k at 5% APR daily compounding for 10 years = $164,866. The same 5% as a simple annual rate (no compounding within year) = $162,889. ~$2,000 difference from compounding frequency alone.
APY Calculator FAQ
What does APY stand for?
Annual Percentage Yield. It's the effective annual return on a deposit account after factoring in how often interest compounds during the year. Banks must disclose APY (not just nominal rate) on savings products under federal Truth in Savings law.
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. At 5% APR compounded daily: APY = (1 + 0.05/365)^365 − 1 = 5.13%.
Is APY the same as interest rate?
Almost. The interest rate is typically the nominal rate (without compounding). APY is the effective rate (with compounding). A 4.40% nominal rate compounded daily is a 4.50% APY — the second number is what you actually earn.
Does the APY include fees?
No — APY shows gross interest before any account fees. Most HYSAs have no fees, so APY = effective return. If your account has a monthly maintenance fee, deduct it manually to get net return.
Why is daily-compounded APY higher than monthly?
More frequent compounding means interest earns interest sooner. The difference shrinks as frequency increases. Daily and continuous compounding are nearly identical (5.127% vs 5.127% on 5% nominal) — past daily, frequency doesn't matter.
Can APY change?
Yes for variable-rate accounts (HYSAs, money market accounts) — they float with the Fed funds rate. Fixed-rate products like CDs and Treasury bonds lock in APY at purchase for the full term.