How It Works
The APY formula accounts for compounding: APY = (1 + r/n)^n − 1.
APY = (1 + APR/n)^n − 1 | where n = compounding periods per year
- More compounding periods → slightly higher effective yield.
- Annual interest earned = deposit × APY.
Finance calculator
APY Calculator
Convert APR to APY (Annual Percentage Yield) to understand your true savings account return, accounting for compounding frequency.
Enter Your Numbers
%
The stated nominal rate on the account.
Daily=365, Monthly=12, Quarterly=4, Annual=1.
$
Initial deposit to calculate interest earned.
APY (Annual Percentage Yield)
5.1162%
Effective annual rate including compounding.
Formula verified 9 September 2026
Annual Interest Earned
$511.62
Year-End Balance
$10,511.62
Daily Interest Earned
$1.4017
Estimate only — not financial advice; lender terms, fees, and taxes vary. Read the full disclaimer ↓
APY by Compounding Frequency
Add your numbers to see the visual breakdown.
Estimates only — not financial, tax, or professional advice.
100% private — every number you enter is calculated in your browser and never sent to our servers.
What it calculates: APY (Annual Percentage Yield), Annual Interest Earned, Year-End Balance, Daily Interest Earned.
Updated 5 June 2026 · Transparent assumptions
Worked Example
$10,000 at 5% APR, compounded monthly.
APR
5.000%
Compounding
Monthly (12×/year)
APY
5.1162%
Annual Interest
$511.62
Year-End Balance
$10,511.62
Monthly compounding turns a 5% APR into a 5.12% APY — you earn $11.62 more than simple interest would give you.
APR vs APY: The Number That Tells You What You Actually Earn
APR is the rate; APY is the yield
APR (annual percentage rate) is the plain nominal rate before compounding. APY (annual percentage yield) is what you actually earn once compounding is folded in. Because interest starts earning interest of its own during the year, APY is always at least as high as APR — equal only when interest is credited just once a year.
This calculator converts an APR and a compounding schedule into the APY, so you see the real return rather than the headline rate. At 5% APR compounded monthly, the APY is about 5.12% — a small but genuine bump.
Why more frequent compounding lifts the yield
The more often interest is credited, the sooner each piece of interest begins earning interest of its own. Daily compounding edges out monthly, which edges out annual. At a 5% APR the APY runs from 5.000% (annual) to 5.116% (monthly) to about 5.127% (daily).
The effect is real but modest, and it widens as the rate rises. For most savers the compounding schedule is a tiebreaker between otherwise similar accounts, not the main event — the headline rate matters far more.
APY is the only fair way to compare accounts
Because APY already bakes in each account’s compounding schedule, it lets you line up offers on equal footing — which is why US banks are generally required to advertise the APY on deposit accounts. The trap is comparing one bank’s APY to another’s APR; always match APY to APY.
When an account quotes only a nominal rate, run it through this tool first so you are comparing like with like.
What the APY does not tell you
Two things sit outside the yield. First, most savings rates are variable — the bank can change them at any time — so a rate cut mid-year would leave you below this projection, which assumes a fixed rate for twelve months.
Second, interest is generally taxable in the year you earn it, so your after-tax yield is lower than the APY unless the account sits in a tax-advantaged wrapper. Treat the figures here as a pre-tax, single-year estimate.
Assumptions & Best Uses
- Rate remains fixed for the full year.
- No withdrawals during the year.
Limitations
- Does not account for taxes on interest income.
- Some accounts may have tiered rates.
Frequently Asked Questions
APR vs APY: what is the difference?
APR (Annual Percentage Rate) is the nominal rate without compounding. APY (Annual Percentage Yield) includes compounding and is always equal to or greater than APR. For savings accounts, always compare APY.
What compounding frequency is best?
Daily compounding earns slightly more than monthly or annual. At 5% APR: daily APY = 5.127%, monthly APY = 5.116%, annual APY = 5.000%. The difference is small but adds up over time.
Why is APY always at least as high as APR?
APY captures the effect of earning interest on previously earned interest. With annual compounding the two are equal because interest is only credited once. With any more frequent schedule, each chunk of interest starts earning its own interest before the year ends, which lifts the effective yield above the stated nominal rate. The gap widens as the rate rises and as compounding gets more frequent.
Which number should I use to compare savings accounts?
Compare APY, not APR. Because APY already folds in each account’s compounding schedule, it lets you line up offers on equal footing. US banks are generally required to advertise the APY on deposit accounts, so it is usually the figure shown — just make sure you are comparing APY to APY rather than APY to a nominal rate.
Does this calculator account for taxes?
No. Interest on a standard savings account is generally taxable income in the year you earn it, which lowers what you actually keep. The figures here are pre-tax. Your after-tax yield depends on your tax bracket and whether the account is held in a tax-advantaged wrapper, so treat the interest shown as a before-tax estimate.
Will my real return match this if the rate changes?
Only if the rate holds for the full year. Most savings accounts pay a variable rate that the bank can adjust at any time, so a rate cut partway through the year would leave you with less than the projection. The calculator assumes a single fixed rate for twelve months, which is a clean starting point rather than a guarantee.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
- Understanding Deposit Insurance — APY is the comparison figure for insured savings, MMDAs, and CDsFederal Deposit Insurance Corporation (FDIC) · verified 2026-06-04
- Compound Interest Calculator — the compounding that turns a nominal APR into the effective APYU.S. Securities and Exchange Commission (Investor.gov) · verified 2026-06-04
Finance disclaimer
Results are estimates based on the figures you enter and standard formulas. Rates, fees, taxes, and lender terms vary and change over time, so confirm important numbers with your lender or a qualified professional. This is educational information, not financial advice.
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What's changed (2 updates)
Published 9 September 2026
- Published the calculator with its formula, worked example, assumptions, limitations and FAQs, and added an automated formula test suite covering it.
- Verified the effective-rate conversion against an independent expm1/log1p computation and property-tested that the yield rises with compounding frequency and never exceeds the continuous limit.