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APY Calculator: APR to APY and Savings Interest
Turn an interest rate into the yield you really earn, compare compounding options and see what your balance earns each month.
The APY formula
APY = (1 + APR ÷ n)n − 1, where n is the number of times interest compounds per year. With 4.5% compounded monthly: (1 + 0.045 ÷ 12)12 − 1 = 0.04594, or 4.594% APY. To go the other way, APR = n × ((1 + APY)1/n − 1).
Why banks quote APY on savings and APR on loans
US law (the Truth in Savings Act) requires banks to show APY on deposit accounts so you can compare them fairly. Because APY is always the higher number, it also makes savings rates look better. Loans are quoted as APR, the lower number, even though credit cards compound daily, so the true yearly cost of a 24% APR card is about 27%.
What your savings can earn
| Balance | 0.4% APY | 4% APY | 5% APY |
|---|---|---|---|
| $5,000 | $20 | $200 | $250 |
| $10,000 | $40 | $400 | $500 |
| $25,000 | $100 | $1,000 | $1,250 |
Interest for one year with no deposits or withdrawals. Online banks and credit unions usually pay several times what large branch banks pay, with the same FDIC or NCUA protection.
Frequently asked questions
What is the difference between APR and APY?
APR is the simple yearly rate before compounding. APY is what you actually earn in a year once interest earns interest. A 4.5% APR compounded monthly is a 4.59% APY.
How much interest will $10,000 earn in a high-yield savings account?
At 4% APY, $10,000 earns $400 in a year, roughly $33 a month. At a typical big-bank rate of 0.4% it would earn just $40.
Does daily compounding make a big difference?
Not much. 4.5% compounded daily is 4.602% APY, versus 4.594% compounded monthly: about 80 cents a year on $10,000. The rate itself matters far more than how often it compounds.