APY Calculator
Convert a nominal interest rate and compounding frequency into the real annual yield you’ll actually earn.
Understanding the APY Calculator
Banks quote two different rates: the nominal rate (sometimes labeled the interest rate) and the Annual Percentage Yield, or APY. The nominal rate ignores compounding within the year; APY accounts for it, so it always sits at or above the nominal rate whenever compounding happens more than once a year.
The gap between nominal rate and APY grows with compounding frequency — daily compounding produces a slightly higher APY than monthly, which produces a higher APY than annual, for the same nominal rate. The difference is usually small on a savings account, but it’s the correct number to use when comparing two accounts with different compounding schedules.
Use this calculator whenever a bank, CD, or savings product lists a nominal rate and you want the true annual return, or when comparing two offers that compound on different schedules.
See it in practice
Example 1 — Monthly-compounding savings account
Example 2 — Daily-compounding account
Common questions
Because APY factors in interest earned on interest already added during the year. The more frequently interest compounds, the more those small gains stack up, so APY edges above the nominal rate.
Always compare APY, not the nominal rate. Two accounts can list the same nominal rate but pay different amounts because one compounds daily and the other monthly or annually.
No — APR is used for borrowing costs and typically does not factor in compounding the same way; APY is used for deposit/earning products and does. See the APR calculator for the borrowing-side counterpart.
No, APY is a rate, not a dollar amount — it’s the same percentage regardless of balance. The deposit field just shows what that rate means in dollars for a sample balance.
This depends on prevailing interest rate conditions, which shift over time with the Federal Reserve’s target rate. High-yield online savings accounts typically offer meaningfully higher APYs than traditional brick-and-mortar banks, so it’s worth comparing current rates directly.
This varies by financial institution. Most savings accounts compound daily or monthly, and the compounding frequency is already factored into the advertised APY, so you don’t need to know the exact frequency to compare two accounts fairly.
No. The interest rate is the nominal rate before compounding is factored in. APY reflects the actual annual return after compounding, which means APY is always equal to or higher than the nominal interest rate on the same account.
Generally yes for the same deposit and time period, but check for balance minimums, promotional rate periods that expire, or withdrawal limits that might apply, since these can affect how much of the advertised APY you actually earn.
Yes, interest earned in a savings account is generally taxable as ordinary income in the year it’s earned, regardless of whether you withdraw it. Your bank will typically issue a Form 1099-INT if you earn more than $10 in interest during the year.