APY to APR Calculator
Convert between Annual Percentage Yield (APY) and Annual Percentage Rate (APR). Compare savings accounts with different compounding frequencies and find the best return on your money.
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Detailed Rate Breakdown
Real Dollar Impact
Compounding Frequency Comparison
Same APR (5.000%), different compounding frequencies:
| Frequency | Periods/Year | Resulting APY | Future Value | vs Annual |
|---|---|---|---|---|
| Daily | 365 | 5.127% | $10,512.67 | +$12.67 |
| Monthly | 12 | 5.116% | $10,511.62 | +$11.62 |
| Quarterly | 4 | 5.095% | $10,509.45 | +$9.45 |
| Semi-Annually | 2 | 5.062% | $10,506.25 | +$6.25 |
| Annually | 1 | 5.000% | $10,500.00 | $0.00 |
| Continuous | ∞ | 5.127% | $10,512.71 | +$12.71 |
Understanding APY vs APR
What is APY (Annual Percentage Yield)?
APY, or Annual Percentage Yield, is the actual rate of return you earn on your savings or investment over one year, including the effect of compounding interest. It represents what you'll really earn after interest compounds throughout the year.
Banks are required by federal law (Truth in Savings Act) to advertise APY for deposit accounts, making it easier for consumers to compare different savings accounts, CDs, and money market accounts fairly.
Example:
If you deposit $10,000 in an account with 5% APY, you'll have exactly $10,500 after one year, regardless of the compounding frequency. The APY already accounts for compounding.
What is APR (Annual Percentage Rate)?
APR, or Annual Percentage Rate, is the nominal interest rate before accounting for the effects of compounding. It's the simple, stated rate that gets applied to your balance.
For savings accounts, APR is used internally in calculations but isn't the number that matters to you. What matters is the APY, which shows what you'll actually earn. APR is more commonly associated with loans and credit cards, where it represents the interest rate you pay.
Key Differences
APY (For Savers)
- Includes compounding effects
- Always ≥ APR (when compounding > 1x/year)
- Required for deposit account advertising
- What you actually earn
- Higher is better for savings
APR (Base Rate)
- Nominal rate without compounding
- Always ≤ APY (when compounding > 1x/year)
- Used in calculation formulas
- Base rate before compounding
- More common for loans and credit cards
How Compounding Frequency Affects Returns
The frequency of compounding determines how often interest is calculated and added back to your principal. More frequent compounding means your interest starts earning interest sooner, resulting in higher overall returns.
Common Compounding Frequencies
- Daily (365 times/year): Interest calculated and added every day. Most common for high-yield savings accounts. Offers the best returns for standard compounding.
- Monthly (12 times/year): Interest calculated and added once per month. Common for many savings accounts and CDs.
- Quarterly (4 times/year): Interest calculated every three months. Less common for savings accounts today.
- Annually (1 time/year): Interest calculated once per year. APY equals APR with annual compounding.
- Continuous: Theoretical maximum compounding (infinite frequency). Uses the mathematical constant e. In practice, yields almost identical results to daily compounding.
💡 Key Insight:
On $10,000 at 5% APR for 10 years, daily compounding earns you about $198 more than annual compounding - that's free money just from how often interest is calculated!
Conversion Formulas
APR to APY Formula
Where:
- APR = Annual Percentage Rate (as a decimal, so 5% = 0.05)
- n = Number of compounding periods per year
- APY = Resulting Annual Percentage Yield
Example: Converting 5% APR with monthly compounding:
APY = (1.004167)^12 - 1
APY = 1.05116 - 1
APY = 0.05116 = 5.116%
APY to APR Formula
Where:
- APY = Annual Percentage Yield (as a decimal, so 5% = 0.05)
- n = Number of compounding periods per year
- APR = Resulting Annual Percentage Rate
Example: Converting 5% APY with daily compounding:
APR = 365 × [1.0001336 - 1]
APR = 365 × 0.0001336
APR = 0.04879 = 4.879%
Practical Applications
Comparing Savings Accounts
When shopping for savings accounts, always compare APY to APY. Don't be fooled by accounts advertising their APR or "rate" without specifying APY - the true return might be different.
Example Comparison:
- Bank A: Advertises "5.00% rate" (this is APR, monthly compounding)
→ Actual APY: 5.116% - Bank B: Advertises "5.00% APY" (daily compounding)
→ APY: 5.00% - Winner: Bank A - The 5.116% APY beats Bank B's 5.00% APY, even though both advertise "5%"
CD Shopping
Certificates of Deposit (CDs) can have vastly different compounding schedules. A 12-month CD might compound monthly, quarterly, or even just at maturity. Always check both the APY and when you can access the compounded interest.
Some CDs pay interest monthly but only compound at maturity - meaning your interest doesn't earn interest. In these cases, the APY will equal the APR because there's effectively no compounding during the term.
High-Yield Savings Accounts
High-yield savings accounts typically offer daily compounding, which maximizes your returns. As of 2025, competitive high-yield savings accounts offer APYs around 4-5%, significantly higher than traditional banks' 0.01-0.50% APY.
The difference between 0.01% and 5% APY on $10,000 is about $499 per year - nearly $500 in free money just from choosing the right account!
Common Mistakes to Avoid
❌ Mistake 1: Comparing APR to APY
Never compare an account's APR to another's APY. Always convert both to the same metric (preferably APY) using our calculator. An account advertising 5% APR is not the same as 5% APY.
❌ Mistake 2: Ignoring Compounding Frequency
Two accounts with the same APY but different compounding frequencies will return the same amount over one year, but the APY already accounts for compounding. If you're comparing APRs, compounding frequency matters significantly.
❌ Mistake 3: Forgetting About Fees
APY doesn't include monthly maintenance fees or other account charges. A $5/month fee on a $1,000 balance effectively reduces your return by 0.6% annually. Always factor in fees when comparing accounts.
❌ Mistake 4: Assuming Rates Are Fixed
Most savings account APYs are variable and can change at any time. CD rates are typically fixed for the term, but savings accounts, money market accounts, and high-yield savings can fluctuate with Federal Reserve rate changes.
Maximizing Your Savings Returns
- Choose High APY: Shop around for the highest APY. Online banks and credit unions typically offer much better rates than traditional brick-and-mortar banks.
- Prefer Daily Compounding: When APYs are equal, choose accounts with daily compounding over monthly or quarterly compounding (though the difference is usually small).
- Minimize Fees: A $10/month fee can erase the benefit of a high APY. Look for no-fee accounts or maintain the minimum balance to waive fees.
- Consider Account Tiers: Some accounts offer higher APYs for higher balances. If you have significant savings, check if you qualify for a better rate tier.
- Keep Emergency Funds Accessible: Don't chase slightly higher CD rates if you might need the money. Early withdrawal penalties can wipe out interest gains.
- Monitor Rate Changes: Savings account APYs change frequently. Review your account quarterly to ensure you're still getting a competitive rate.
Start Earning More Today
Use our calculator to compare the accounts you're considering. Even a 1% difference in APY can mean hundreds or thousands of dollars over time. The best savings account is one with a high APY, daily compounding, no fees, and FDIC insurance protection.
Key Financial Terms
Understand the essential concepts behind this calculator
APY (Annual Percentage Yield)
The effective annual rate of return on savings, accounting for compound interest.
APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Compound Interest
Interest calculated on both principal and accumulated interest, creating exponential growth over time.
Frequently Asked Questions
Common questions about the APY to APR Calculator
🏦 Banking & Savings Data Sources
• Top online banks: 4.00-4.75% APY
• Traditional big banks: 0.01-0.46% APY
• Difference: 100-475x higher returns with high-yield accounts
• Example: $10,000 at 4.5% = $450/year vs $1/year at 0.01%
→ Source: FDIC - National Deposit Rates
• 6-month CD: 4.50-5.25% APY
• 1-year CD: 4.75-5.50% APY
• 5-year CD: 4.00-4.75% APY
• CDs lock in your rate but penalize early withdrawal
→ Source: Bankrate - CD Rate Tracker
• Monthly maintenance fee: $5-25/month (waivable with minimum balance)
• Overdraft fee: $25-35 per occurrence
• Out-of-network ATM fee: $3-5 per withdrawal
• Wire transfer fee: $15-30 domestic, $35-50 international
• Average American pays $200-400/year in bank fees
→ Source: CFPB - Banking Fee Research
• Flat-rate cashback cards: 1.5-2% on all purchases
• Category bonus cards: 3-5% on specific categories (dining, gas, groceries)
• Points-based cards: 1-5x points (value varies: $0.01-0.02/point)
• Average credit card user earns $200-500/year in rewards
→ Source: ValuePenguin - Credit Card Rewards Study
• Coverage: $250,000 per depositor, per insured bank
• Covers checking, savings, CDs, money market deposit accounts
• Does NOT cover investments (stocks, bonds, mutual funds, crypto)
→ Source: FDIC - Deposit Insurance Coverage
• Top money market accounts: 4.00-4.75% APY
• Often have check-writing and debit card access
• Higher minimum balance requirements than savings accounts
• Monthly withdrawal limits removed in 2020 (COVID regulation change)
→ Source: Bankrate - Money Market Rates
• Online banks offer 50-100x higher savings rates (lower overhead costs)
• 60% of Americans still use traditional banks for primary checking
• Online-only banks: Ally, Marcus, Discover, American Express, Capital One 360
→ Source: Pew Research - Banking Trends
Tip: Shop around for better rates. Moving to a high-yield savings account and no-fee checking can save $500+ annually in fees while earning significantly more interest.
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⚠️ Important Disclaimer
This APY to APR Calculator provides estimates for educational and informational purposes only. Actual results may vary significantly based on individual circumstances, market conditions, regulatory changes, and other factors beyond the scope of this calculator.
The calculations and projections provided are based on assumptions and historical data that may not reflect future performance.Past performance does not guarantee future results.
This tool is not financial advice, tax advice, legal advice, or investment advice. For personalized guidance tailored to your specific situation, please consult with qualified professionals including:
- Certified Financial Planner (CFP)
- Certified Public Accountant (CPA) for tax matters
- Licensed attorney for legal matters
- Registered Investment Advisor (RIA) for investment decisions
Data Accuracy: All data sources, statistics, and rates were verified as accurate as of October 2025. Tax rates, market conditions, and other financial data change over time. Always verify current rates and consult official sources.
No Warranties: While we strive for accuracy, we make no warranties or guarantees regarding the accuracy, completeness, or reliability of any information provided. Use this tool at your own risk.