How to Calculate APY (The "True" Interest Rate)

When comparing savings accounts, you see two numbers: APR and APY. Banks highlight the higher one. Do you know which is which? Knowing the difference can mean earning significantly more.

The Pain of Misleading Rates

APR (Annual Percentage Rate) is simple interest. It ignores compounding. APY (Annual Percentage Yield) includes compounding. The more frequently interest is added (daily vs. monthly), the higher the APY.

The Easy Way: Instant Comparison

Our tool does the heavy lifting. Just enter the interest rate and compounding frequency, and see the true annual return instantly.

Frequently Asked Questions

Why is APY higher?

Because APY includes the interest earned on your interest.