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APY vs. APR Calculator
Banks advertise APR. You earn APY. Here's the difference — and why it matters for your HYSA, CD, and money market accounts.
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APY (What You Actually Earn)
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APR (Advertised)
5.00%
APY − APR Gap
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Interest (APR basis)
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Interest (APY basis)
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Extra earned via compounding (Year 1)
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All Compounding Frequencies at 5.00% APR
Side-by-side: what APR gets advertised vs what APY you actually earn.
| Frequency | APR | APY | Difference | Interest on $10,000 |
|---|
APY Comparison Across Frequencies
How APY vs APR Works
APR (Annual Percentage Rate) is the nominal interest rate — the number banks put in the headline. It does not account for how often interest compounds within the year.
APY (Annual Percentage Yield) is the effective rate after accounting for compounding. This is the number that tells you what you'll actually earn over a year.
Where n = compounding periods per year (365 for daily, 12 for monthly, etc.).
Worked Example
A HYSA advertises 5.00% APR with daily compounding:
- APY = (1 + 0.05/365)^365 − 1 = 5.127%
- On $10,000: APR basis = $500, APY basis = $512.70
- Extra from compounding = $12.70 in Year 1
Small per year — but on a $100,000 HYSA at 5%, that's $127 extra annually, and compounding magnifies it over time. When comparing CD rates or money market accounts, always compare APY to APY.
Frequently Asked Questions
What is the difference between APR and APY?▾
APR (Annual Percentage Rate) is the nominal interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding and represents what you actually earn. APY is always ≥ APR.
Why do banks advertise APR instead of APY?▾
For savings products, banks must advertise APY (it's higher, more attractive). For loans and credit cards, lenders often advertise APR (it's lower, making loans seem cheaper). Always compare APY to APY.
How is APY calculated from APR?▾
APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For example, 5% APR compounded daily: APY = (1 + 0.05/365)^365 - 1 = 5.127%.
Does compounding frequency matter for HYSAs and CDs?▾
Yes. High-yield savings accounts and CDs typically compound daily (365x/year). Daily compounding gives a slightly higher APY than monthly compounding at the same APR. Always check the APY when comparing HYSA and CD offers.
What is a good APY for a savings account in 2025?▾
In 2025-2026, top high-yield savings accounts (HYSAs) offer 4.5–5.5% APY. The national average for regular savings accounts is around 0.50% APY. A good HYSA APY is anything above 4.00%.
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