📊 FinCalc Lab

🔁 APY Calculator

Two accounts with the same nominal rate can pay different amounts depending on how often they compound. Enter a rate and compounding frequency to get the true effective annual yield (APY).

APR vs APY in one line

APR is the stated ("nominal") yearly rate; APY is what you actually earn once compounding is included. Because interest earns interest between compounding dates, APY is always equal to or higher than APR — and the more frequently it compounds, the bigger the gap. The formula: APY = (1 + APR/n)n − 1, where n is the number of compounding periods per year.

Why frequency matters

A 5% nominal rate becomes 5.00% APY compounded annually, 5.09% quarterly, 5.12% monthly, and 5.13% daily. The differences look tiny, but they're free money — and over large balances or many years they add up. Crucially, this is why you should compare savings accounts by APY, not the headline rate: a slightly lower nominal rate that compounds daily can beat a higher one that compounds annually.

The marketing angle

Banks advertise APY on savings because it's the larger, more attractive number. Lenders advertise APR on debt because it's the smaller one — so your credit card's real cost (its APY) is higher than the rate on the statement. Knowing how to convert between them means neither side's marketing can mislead you. See our full APR vs APY guide for the deeper explanation.

Frequently asked questions

Is APY always higher than APR?

Yes, unless interest compounds exactly once a year, in which case they're equal. Any more frequent compounding makes APY larger, because interest starts earning interest sooner.

Which should I use to compare savings accounts?

APY. It reflects real earnings including compounding, so it's the only fair basis for comparison. Two accounts with the same nominal rate but different compounding frequencies have different APYs.

Does more frequent compounding make a big difference?

The jump from annual to daily compounding is modest at normal rates (a fraction of a percent), but it's still free money, and it grows with larger balances, higher rates, and longer time horizons.

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🪜 CD Ladder Calculator 📈 Compound Interest Calculator 🎓 College Savings Calculator 📐 Simple Interest Calculator 🏦 CD Calculator 💹 ROI Calculator

Further reading

"APR vs APY: The Difference That Costs (or Earns) You Money" APR and APY look alike but mean different things. Understand compounding, why lenders quote APR and banks quote APY, and how to compare fairly. "How Credit Card Interest Really Works (and How to Pay Zero)" How credit card APR, daily compounding and the grace period actually work — why balances snowball, and the simple habit that lets you pay no interest at all. "ETFs vs Mutual Funds: Which Should You Choose?" The real differences between ETFs and mutual funds — trading, fees, taxes and minimums — and why for most long-term investors it barely matters which you pick. How Compound Interest Builds Wealth (and Why Starting Late Costs So Much) A plain-English walkthrough of compound growth, with real numbers showing why time in the market beats timing — and what starting five years late actually costs.

This calculator is for educational purposes only and does not constitute financial advice. Results are estimates based on the inputs and assumptions shown.