APY Calculator

The APY Calculator converts a nominal interest rate and compounding frequency into the Annual Percentage Yield, the single number that tells you what you will actually earn in a year once compounding is included. APY is defined as (1 + r/n)^n - 1, where r is the nominal annual rate and n is the number of compounding periods per year. Because it folds compounding into one figure, APY lets you compare savings accounts and CDs on an apples-to-apples basis even when they compound daily, monthly, or quarterly.

The key distinction this tool makes clear is between the stated nominal rate (sometimes called APR on the deposit side) and the effective yield. A 5% rate compounded monthly produces an APY of about 5.12%, while the same 5% compounded daily produces roughly 5.13%. Banks are required to advertise APY on deposit products precisely because it reflects the true earning power, removing the confusion that different compounding schedules would otherwise create.

Use the APY Calculator whenever you are shopping for a high-yield savings account, certificate of deposit, or money market account and want to rank offers fairly. It complements the Daily Compound Interest calculator, which shows the dollar growth of a balance, and the Future Value Calculator, which projects a goal forward including regular contributions. For loans and credit, remember that the borrowing equivalent is APR, which moves in the opposite direction of your interest.

A useful tip is to always compare APY to APY rather than mixing it with nominal rates. If a competing product only lists a nominal rate, plug it into this calculator with the correct compounding frequency to reveal the true APY before deciding. Even a tenth of a percentage point compounds into real money over many years on a large balance.