APY Calculator
Convert a nominal APR into APY so you can compare accounts or return assumptions that compound on different schedules.
APR vs APY
APR is the stated annual rate. APY shows the effective annual rate after compounding. Use APY when comparing products with different compounding schedules.
Next steps
Use the compound interest calculator to project balances over time, or read APY vs APR for a plain-English explanation.
What APY is, and why it is the number to compare
APY — annual percentage yield — is the rate you actually receive over a year once compounding inside that year is included. A nominal rate is the rate before that adjustment. Two accounts advertising the same nominal 8% pay different amounts if they compound differently; their APYs make that visible.
| Compounded | Periods per year | APY on an 8% nominal rate | Interest on $10,000 in year 1 |
|---|---|---|---|
| Annually | 1 | 8.000% | $800.00 |
| Semi-annually | 2 | 8.160% | $816.00 |
| Quarterly | 4 | 8.243% | $824.32 |
| Monthly | 12 | 8.300% | $830.00 |
| Daily | 365 | 8.328% | $832.78 |
The whole spread between annual and daily compounding on 8% is $32.78 on a $10,000 balance in the first year. Meaningful, but small enough that a rate difference of even a quarter of a point matters more. If you are comparing accounts, compare APY to APY and then look at fees and conditions.
Never compare a nominal rate to an APY. It is the most common way savers talk themselves into the worse account, because the nominal figure of the better-compounding product looks lower than it is. Convert both to APY first — that is exactly what this calculator does.
APY, APR and effective annual rate
- APY is used for deposits and savings. Higher is better for you.
- APR is used for borrowing. Depending on jurisdiction it may include fees, and may or may not reflect compounding — see APY vs APR.
- Effective annual rate is the general mathematical term for the same idea. The EAR calculator handles the conversion in either direction.
- The formula is identical in all three cases: (1 + r/n)n − 1.
One practical caution: an advertised APY often assumes the rate holds for a full year, which introductory and bonus rates do not. An account paying a high APY for three months and a low one afterwards has a blended real return far below its headline.
Questions about APY
What is the APY formula?
APY = (1 + r/n)n − 1, where r is the nominal annual rate as a decimal and n the number of compounding periods per year. An 8% nominal rate compounded monthly gives an APY of 8.300%.
Is APY the same as interest rate?
Only when interest compounds exactly once a year. Otherwise APY is higher than the nominal rate, because it includes the effect of interest earning interest within the year.
Which is better, a higher APY or more frequent compounding?
APY already includes the compounding frequency, which is precisely why it is the right basis for comparison. A higher APY is better regardless of how it was achieved.
Does APY account for fees?
No. An account fee is deducted from your balance separately, and can easily outweigh a small APY advantage on a modest balance. Always compare after fees.