APY (Annual Percentage Yield)
The yearly return on savings including the effect of compounding, which makes it the honest number for comparing deposit accounts.
What APY (Annual Percentage Yield) means
APY tells you what a dollar actually earns over a year in a savings account, CD, or money market account. Unlike a plain interest rate, it accounts for compounding — interest earning interest.
The more often an account compounds, the further APY rises above the nominal rate. An account paying 5% compounded monthly yields about 5.12% APY; compounded daily it is closer to 5.13%.
Banks must disclose APY on deposit accounts, so it is the apples-to-apples figure when shopping rates. Watch for introductory or promotional APYs that reset after a few months, and for rate tiers that only apply above a minimum balance.
Related terms
APR (Annual Percentage Rate)
The yearly cost of borrowing, expressed as a percentage that includes the interest rate plus most lender fees.
Compound Interest
Interest earned on both your original money and the interest already added to it, which makes balances grow faster over time.
High-Yield Savings Account
A federally insured savings account paying a much higher rate than a typical bank account, with full access to your money.
Interest Rate
The percentage charged for borrowing money or paid for depositing it, quoted as an annual figure.
Run the numbers
APY Calculator
Convert a nominal interest rate to its effective annual yield (APY) and see what a deposit earns.
Compound Interest Calculator
See how your savings grow over time with compound interest and regular monthly contributions.
Savings Goal Calculator
Plan how long it will take to reach a savings goal and how much to save each month to get there on time.
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