APY Calculator

Two accounts can advertise the same interest rate and still pay different amounts, because what matters is how often the interest is added to the balance. The nominal rate is the headline; the annual percentage yield, or APY, is the honest number, because it folds the effect of compounding into a single comparable figure. Compounding works by paying interest on interest. If interest is added monthly, each month's interest is calculated on a slightly larger balance than the month before, so the total grows a little faster than the nominal rate alone would suggest. Daily compounding compounds this further; annual compounding does not compound within the year at all, so its APY equals its nominal rate. The gap is small at low rates and widens as rates rise. The same logic explains why a monthly rate is not simply one twelfth of the annual rate, and why lenders and savers use different conventions to describe the same economics. When you compare savings accounts, always compare APY to APY and ignore the nominal figure if both are shown, because only the yield reflects the real annual return for money left untouched. There is a limit to how much more frequent compounding can add. Going from annual to monthly compounding makes a meaningful difference, monthly to daily makes a smaller one, and continuous compounding is a mathematical ceiling that daily compounding already sits very close to. The type of account, the fees and the rate itself matter far more than squeezing out one more compounding period. This calculator converts a nominal rate into its effective annual yield for any common compounding frequency and shows the balance that results. It assumes the rate stays fixed and the money is left alone; real accounts change rates and may charge fees, so use the yield as a like-for-like comparison rather than a promise.

This calculator returns estimates for general information only. It is not financial, investment, tax or legal advice, and it cannot replace guidance from a qualified professional who knows your circumstances. Figures such as loan payments, investment growth and retirement projections are simplified models based on the inputs and assumptions you provide, not guarantees of future results.