What is the difference between APR and APY?

APR is the simple interest rate; APY includes compounding, so it is the true annual yield. With monthly compounding, a 5% APR is about a 5.12% APY.

Why does compounding make APY higher than APR?

Because interest is earned on previously credited interest throughout the year. The more often interest compounds, the more the APY exceeds the APR.

Savings

APY Calculator

Effective annual yield

Convert a nominal interest rate to Annual Percentage Yield (APY) for any compounding frequency — monthly, daily, or continuous.

Yield

Nominal Interest Rate%Stated (APR) rate per yearCompounding FrequencyPrincipal (optional)$

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