How to use the APY calculator
Enter the nominal annual rate and compounding frequency. APY expresses the one-year effect of compounding as a single annual percentage, which makes deposit products easier to compare on a like-for-like basis.
APY formula
When interest compounds more than once per year, APY is higher than the nominal rate because previously credited interest can earn additional interest.
Example: Priya compares a rate with its APY
Priya considers an account with a 5% nominal annual interest rate compounded monthly. Its modeled APY is [(1 + 0.05 ÷ 12)¹² − 1] × 100, or approximately 5.116%.
On an unchanged $10,000 deposit, that produces about $511.62 of interest over one year. If the account already quotes APY, do not compound that APY again as though it were a nominal rate.
Enter the nominal rate, not the quoted APY
If a bank advertises a nominal annual rate and a compounding frequency, this tool converts them into an effective annual yield. Entering an APY as the nominal rate would count compounding twice.
At a nominal 5% compounded monthly, APY is about 5.116%. A $10,000 balance earns about $511.62 over a full year under those assumptions.
Assumptions and limitations
What the estimate assumes
Actual account earnings can depend on balance methods, fees, tiered rates, withdrawals, and when interest is credited.
Sources and reference material
APY Calculator FAQs
What is APY?
Annual percentage yield is an annualized measure of deposit interest that reflects the effect of compounding.
Is APY the same as an interest rate?
Not necessarily. A nominal interest rate states the rate before the compounding effect is annualized, while APY incorporates compounding over a one-year period.
Why is APY useful for savings accounts and CDs?
It provides a common annual measure that can make products with different compounding schedules easier to compare.
Does APY include account fees?
This calculator does not deduct fees. Review the account disclosure for fees, minimum-balance rules, and other conditions.
Is APY guaranteed for a savings account?
Not necessarily. Many savings rates are variable. The calculator applies the entered rate consistently for the modeled year, while the actual account rate can change.
For educational comparison. Actual deposit earnings depend on the institution's account terms, balance method, fees, and crediting rules.