APY vs APR Calculator
APR is the plain rate; APY is what you actually earn once compounding kicks in. This converter translates between the two for any compounding frequency, so you can compare bank offers on equal terms.
Maintained by TheFinanceSection · Methods and corrections
Equivalent APY
4.081%
a 4.00% APR compounded daily really yields this
Interest on example balance
$408.08
what $10,000 earns in one year at that APY
APY = (1 + APR/n)ⁿ − 1, where n is compounds per year. Banks must advertise savings products in APY (Truth in Savings Act), while loans are quoted in APR — that's why the same number means different things on each side of the counter.
What this calculator does
Enter a rate and a compounding frequency and it converts APR → APY or APY → APR using the exact formula APY = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year. It also shows what the resulting yield means in dollars on an example balance.
Why the two numbers exist
APR (annual percentage rate) is the nominal rate before compounding — it's how loans are quoted. APY (annual percentage yield) includes compounding — and the Truth in Savings Act requires banks to advertise deposit products in APY, precisely so "4% compounded daily" and "4.07% compounded annually" are recognizable as the same deal. When comparing savings accounts or CDs, always compare APY to APY.
Does compounding frequency matter much?
Less than banks' marketing implies. 5% APR compounded monthly yields 5.116%; compounded daily, 5.127%. The frequency is worth basis points — the rate itself is worth percentage points, which is why moving idle cash to a high-yield account (see the savings interest calculator) matters far more than compounding fine print.
Frequently asked questions
What's the difference between APY and APR?
APR is the simple annual rate with no compounding; APY is the effective annual yield after compounding. A 4.00% APR compounded daily equals a 4.08% APY. Savings products are advertised in APY, loans in APR.
Is a higher APY always better?
For deposits, yes — APY already accounts for compounding, so it's the one number that lets you compare accounts directly, whatever their compounding schedules. Just also check minimums, fees, and rate caps.
How do I convert APY back to an interest rate?
Use APR = n × ((1 + APY)^(1/n) − 1), where n is compounds per year. The 'APY → APR' mode above does this for you — handy for checking what daily rate a bank is actually crediting.
Why do banks advertise APY on savings but APR on loans?
Regulation — and marketing. APY is the larger-looking number, required on deposits by the Truth in Savings Act; APR is the smaller-looking number, required on loans by the Truth in Lending Act. Both rules exist so competing offers are stated on a standard basis.
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