APR to APY Calculator
Two accounts can advertise the same rate yet pay different amounts, because compounding frequency matters. This calculator converts a nominal rate (APR) into the effective annual yield (APY) — the number that lets you compare savings accounts and loans apples-to-apples.
How this calculator works
APR is the stated annual rate before compounding. APY is what you actually earn (or pay) once interest compounds n times per year:
APY = (1 + APR ÷ n)ⁿ − 1
The rate applied each period is simply APR ÷ n. The more frequently interest compounds, the larger the gap between APR and APY — daily compounding yields slightly more than monthly, which yields more than annual.
Why this matters
When comparing savings accounts, always compare APY to APY — a higher APR with less frequent compounding can lose to a lower APR that compounds daily. For borrowing, the same math means the effective cost is higher than the headline APR suggests.
Learn more
- What's a Good Interest Rate? (For Loans and Savings) — "Good" depends on whether you're borrowing or saving, and on benchmarks like the Fed rate and inflation. How to judge a rate you're offered — APR vs APY.
Frequently asked questions
- What's the difference between APR and APY?
- APR is the simple annual rate without compounding. APY includes the effect of compounding within the year, so it's always equal to or higher than the APR. APY is the fairer number for comparing real returns or costs.
- Why does compounding frequency change the result?
- Each time interest compounds, you start earning interest on previously earned interest. More frequent compounding means more of these cycles per year, producing a slightly higher effective yield from the same nominal rate.
- Which should I use when shopping for a savings account?
- Compare APY, since it reflects what you'll actually earn after compounding. Banks are generally required to advertise APY on deposit accounts for exactly this reason.