If you've ever looked at two savings accounts both advertising "5% interest" and wondered why they pay different amounts, you're not alone. The difference usually comes down to APY versus APR—and it can mean real money.

This APY calculator converts APR (Annual Percentage Rate) to APY (Annual Percentage Yield) so you can compare savings accounts, CDs, and money market accounts on equal footing. Enter your interest rate and compounding frequency, and you'll see exactly what your money will actually earn—not what the marketing materials suggest.

No more mental math. No more guessing which bank offer is better. Just clear answers.

APY stands for Annual Percentage Yield. It tells you the total interest you'll earn on a deposit over one year, expressed as a percentage—including the effect of compound interest.

Here's why that matters: when a bank pays you interest monthly, each payment gets added to your balance. The next month, you earn interest on that slightly larger amount. By year's end, you've earned more than the base rate would suggest.

APY wraps up all that compounding into one number. When you see APY, you're seeing your real return—no extra math required.

Banks don't make this easy. Some show APR, others show APY, and unless you know the difference, you can't compare them fairly.

APR (Annual Percentage Rate) is the base interest rate before compounding. It's the simpler number.

APY (Annual Percentage Yield) is what you actually earn after compounding does its work. It's always equal to or higher than APR.

A real example: 5% APR compounded monthly works out to 5.116% APY. Sounds like a tiny difference, right? On $50,000, that's an extra $58 per year. Over five years, you'd miss nearly $300 by ignoring this distinction.

Why do banks make this confusing?

• For loans, APR is legally required (and makes loans look cheaper)
• For savings, banks can choose—and "5.00% APR" looks cleaner than "5.116% APY"
• Some banks genuinely use APR out of convention, not deception

Don't feel bad if this has confused you before. The terminology isn't intuitive, and banks benefit from that confusion. The fix is simple: always compare APY to APY. If a bank only shows APR, run it through this calculator first.

More frequent compounding means higher APY. But here's what that actually looks like in dollars:

What this actually means: Daily compounding earns about $12.67 more per year than annual compounding on $10,000 at 5%. That works out to roughly $1.27 extra per $1,000 deposited.

Here's the honest truth: compounding frequency matters less than most people think. The difference between daily and monthly compounding is about $1 per year on $10,000. The difference between a 4.5% APY and a 5.0% APY is $50.

Most online savings accounts already compound daily. Focus your energy on finding the highest APY—that's where the real money is.

Step 1: Enter Your Initial Deposit Type in the amount you're starting with. This could be money you're planning to deposit or a balance you already have.

Step 2: Enter the Annual Percentage Rate (APR) This is the interest rate the bank advertises. Look for it in the account details or promotional materials. If they're showing APY instead, you can enter that directly to see your projected growth.

Step 3: Select Compounding Frequency Choose how often interest gets calculated and added to your account:

• Daily – Standard for most online high-yield savings accounts
• Monthly – Common at traditional banks and for many CDs
• Quarterly – Less common today, sometimes seen on older accounts
• Annually – Rare for savings accounts, occasionally used for certain bonds

Not sure? Check your account terms or assume monthly—it's a reasonable middle ground.

Step 4: Enter Investment Term How many months do you plan to keep this money deposited? Enter the number here.

Step 5: Read Your Results The calculator shows you two key numbers:

• APY – Your effective annual return, accounting for compounding
• Final Balance – The total you'll have when your term ends, including all interest earned

Annual Percentage Yield (APY): This single number tells you everything. Higher APY = more money. When comparing bank accounts, the one with higher APY wins—no additional analysis needed.

Final Balance: This is your total at the end of the investment term. For anything longer than a year, watch how compounding accelerates your growth:

$10,000 at 5% APY grows to:

• 1 year: $10,500
• 3 years: $11,576
• 5 years: $12,763
• 10 years: $16,289

Notice something? You earned $2,263 in years 1-5, but $3,526 in years 5-10—even though the rate stayed the same. That's compound interest working harder as your balance grows. Time is the secret ingredient.

Rates shift constantly, but here's a realistic benchmark for late 2024 into 2025:

Some perspective: These rates are historically high. For most of the 2010s, the average savings account paid around 0.06% APY. If you're still earning less than 1% at a traditional bank, switching to an online high-yield savings account could multiply your interest income by 40x or more.

The tradeoff with online banks: Higher rates, but no physical branches. For an emergency fund you rarely touch, that's usually a fair deal. You can always keep a small checking balance at a local bank for cash access.

You came here for practical advice, so here's what actually moves the needle:

1. Always compare APY—never APR This calculator exists because banks don't make apples-to-apples comparison easy. Convert everything to APY before deciding.

2. Read the fine print on rate tiers "Earn 5.0% APY!" sounds great until you discover that rate only applies to balances under $5,000. Larger balances might earn 3.5%. Check what rate applies to your actual deposit size.

3. Ask about promotional rate expiration That eye-catching 5.25% APY might drop to 3.5% after the first six months. Before opening an account, ask: "What's the rate after the promotional period ends?"

4. Consider CDs if you won't need the money CDs typically pay 0.25-0.50% more than savings accounts because you're committing to leave the money alone. If you have funds you genuinely won't touch for 6-12 months, the higher rate might be worth it.

5. Don't overthink small differences Moving $10,000 from a 4.50% account to a 4.55% account earns you an extra $5 per year. That's probably not worth an hour of paperwork and a new tax form. Save your energy for rate differences of 0.25% or more.

6. Set a calendar reminder to rate-check annually Banks change rates. The account that was best last year might be mediocre now. A quick annual comparison keeps you earning competitively without constant monitoring.