APY Calculator
APY is the number that lets you compare savings accounts honestly. Banks advertise nominal rates with different compounding schedules, and the one with the biggest headline is not always the one that pays most. This calculator converts a quoted rate and frequency into the annual percentage yield you would actually earn.
Inputs
Result
5.116%
Compounded monthly
How the apy calculator works
APY = (1 + r/n)^n − 1, where r is the nominal annual rate as a decimal and n is compounding periods per year.
With continuous compounding the ceiling is APY = e^r − 1, which is the theoretical maximum for any given nominal rate.
Going the other way, the nominal rate implied by an advertised APY is r = n × ((1 + APY)^(1/n) − 1) — useful when a bank quotes APY but pays monthly.
Worked example: which account pays more?
- Account A: 5.00% nominal, compounded monthly. APY = (1 + 0.05/12)^12 − 1 = 5.116%.
- Account B: 5.05% nominal, compounded annually. APY = 5.050%.
- Account C: 4.95% nominal, compounded daily. APY = (1 + 0.0495/365)^365 − 1 = 5.075%.
- On 250,000 for a year: A pays 12,790, C pays 12,688, B pays 12,625.
- The account with the lowest headline rate beats the one with the highest.
Common mistakes to avoid
Treating APR and APY as the same thing
APR ignores compounding within the year; APY includes it. For deposits you want APY, for loan costs you want APR plus fees.
Ignoring introductory teaser periods
Many advertised APYs apply for three or six months, then drop. Compute a blended yield across the full year you intend to hold the money.
Overlooking balance tiers and minimums
A headline APY often applies only up to a cap, with the excess earning far less. Check the tier your balance actually lands in.
Frequently asked questions
What is the difference between APR and APY?
APY accounts for intra-year compounding, APR does not. For the same nominal rate, APY is always equal to or higher than APR.
Is a higher APY always better?
For a plain savings account, yes. But check lock-in periods, withdrawal penalties, minimum balances and whether the rate is promotional.
How do I convert APY back to a monthly rate?
Monthly rate = (1 + APY)^(1/12) − 1. A 5.12% APY corresponds to about 0.4167% per month.
Does APY include fees?
No. A monthly maintenance fee can wipe out the yield on a small balance, so subtract annual fees from projected interest before comparing.
Why do banks advertise APY instead of the nominal rate?
Because APY is the larger, and more honest, number for depositors — and regulators in many markets require it precisely to prevent frequency games.
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