How to use the APY calculator
- Under Solve for, keep APY from rate to convert a stated rate to APY, or choose Rate from APY to find the rate behind a quoted APY.
- Enter the Interest rate (% a year), or the APY (% a year), and pick the Compounding frequency from your account agreement.
- Optionally enter a Deposit ($) and a Term to see the interest earned and ending balance.
- Check the Same rate, different compounding table to compare every choice.
How APY is calculated
APY is what you earn in a year once interest on interest is counted. For a stated rate r compounded n times a year:
APY = (1 + r ÷ n)n − 1 and, for continuous compounding, APY = er − 1
Over a term of t years the balance grows to Deposit × (1 + APY)t. Going the other way, r = n × ((1 + APY)1/n − 1), or ln(1 + APY) when compounding is continuous. Federal rules state the same idea in dollars, APY = 100 × [(1 + Interest ÷ Principal)365 ÷ Days in term − 1], in Appendix A to Regulation DD.
Worked example with the default numbers
A 5% stated rate compounded monthly earns 0.05 ÷ 12 = 0.4167% each month. Twelve months multiply your money by 1.00416712 = 1.051162, so the APY is 5.116%. A $10,000.00 deposit for 1 year earns $511.62 and ends at $10,511.62. Compounded daily, the same 5% has an APY of 5.127% and earns $512.67; compounded once a year it is 5.000% and earns $500.00.
Limits and edge cases
- If a bank advertises an APY, do not compound it again. $10,000 at 4.5% APY earns $450.00 in one year, because the APY already includes the compounding.
- The rate is held constant, and deposits, withdrawals, fees and taxes are ignored. Savings rates can change, while a CD locks its rate. To add regular deposits, use the compound interest calculator, or the savings goal calculator to plan a target.
- Banks credit interest in whole cents, so a statement can differ by a few cents. If the term is not a whole number of compounding periods, the tool still grows the balance by (1 + APY)t, which can slightly overstate a bank that pays only at period end.
- APY is for deposits. For a loan with fees, use the APR calculator, and for interest on the original amount only, the simple interest calculator.
- Interest is generally taxable income, and the FDIC insures deposits up to $250,000 per depositor, per insured bank, for each ownership category.
APY questions people ask
What is the difference between APY and APR?
APR is a stated yearly rate before compounding, and on a loan it also folds in certain fees. APY counts interest earned on interest, so for the same stated rate it is higher: 5% compounded monthly is a 5.116% APY. Compare savings accounts on APY and loans on APR.
How do you calculate APY from an interest rate?
Divide the rate by the number of compounding periods in a year, add 1, raise the result to the number of periods, and subtract 1. For 5% compounded monthly that is (1 + 0.05 ÷ 12)^12 − 1 = 5.116%.
Does daily compounding beat monthly compounding?
Yes, but only slightly. At a 5% stated rate, monthly compounding gives a 5.116% APY and daily gives 5.127%, about $1 more a year on $10,000. Even continuous compounding, the upper limit, only reaches e^0.05 − 1 = 5.127%.
If an account pays 4.5% APY, how much interest will $10,000 earn?
$450.00 in one year, for an ending balance of $10,450.00. The APY already includes compounding, so do not compound it again. Using Rate from APY, the stated rate behind a 4.5% APY is 4.410% compounded monthly or 4.402% compounded daily.
What is a good APY for a savings account?
Compare it with the FDIC national average, which was 0.37% for savings accounts on September 21, 2026. Accounts paying well above that are competitive, but also check for minimum balances, fees and whether the rate is variable.
Sources: Consumer Financial Protection Bureau, Regulation DD, Appendix A, Annual Percentage Yield Calculation. FDIC, National Rates and Rate Caps and Deposit Insurance.