APY calculator
APY is what an interest rate becomes once compounding is counted, and it is the number to compare accounts on. Convert a rate into its APY and see what it earns, or put two APYs side by side and see what the gap is worth in dollars on your own balance.
Leave at zero for a lump sum
The nominal rate, before compounding
Most online savings accounts compound daily
Your result
A 4.00% rate compounded daily is an APY of 4.08%.
$10,000 would reach $12,214 after 5 years. Of that, $2,214 is interest and $10,000 is money you put in.
Both figures hold the rate flat for the whole period. A savings APY is variable and can change at any time, so treat this as arithmetic on the numbers you entered, not a forecast. Your figures stay in your browser and are never sent to us.
APY and interest rate are not the same number
The interest rate is what the bank applies. The APY is what you end up with after that interest starts earning interest of its own. The formula is (1 + r/n)n − 1, where r is the nominal annual rate and n is how many times a year the account compounds.
A 4.00% rate compounded daily is an APY of 4.08%. Compounded monthly it is 4.07%. Compounded once a year it is exactly 4.00%. The gaps are small, which is the point: compounding frequency is a real effect but a minor one next to the rate itself, and anyone selling you an account on the strength of daily compounding is drawing your attention away from the number that matters.
Savings accounts in the United States are advertised by APY, so in practice you are usually comparing like with like. Where it goes wrong is comparing a quoted APY against a rate you found somewhere else. Convert first.
What the gap between two accounts is actually worth
This is the question worth asking before you move money, and it has no general answer, because it depends entirely on your balance and how long the money sits. A percentage point on $2,000 for a year is a takeaway meal. The same percentage point on $40,000 for five years is a holiday.
For scale, the FDIC put the national average for savings accounts at 0.38%. Competitive online savings accounts pay several times that. The compare mode is set up with that average against a round 4% so you can see the shape of it, but replace both with your own numbers, because we do not publish bank rates here and neither figure is a quote.
Once you have the dollar figure, the decision is no longer about rates. It is about whether that amount is worth the paperwork, and whether the account paying more has a fee or a minimum that eats the difference.
Why this projection is not a forecast
Everything above holds the APY flat for the whole period. Real savings rates do not behave that way. A savings APY is variable, the bank can change it whenever it likes, and it usually does so in the same direction as the Federal Reserve. What actually moves a savings rate covers why.
So read the result as what would happen if the rate held, not as a prediction that it will. If you want a rate that genuinely cannot move, that is a CD, and it costs you access to the money in exchange. The trade-off is here.
Frequently asked questions
What is APY?
APY, or annual percentage yield, is what you actually earn over a year once compounding is counted. The interest rate is the headline number the bank applies; the APY is what that turns into after the interest earns interest. APY is the figure to compare between accounts, because it already accounts for how often each one compounds.
What is the difference between APY and interest rate?
The interest rate is the nominal annual rate. APY is that rate after compounding. A 4.00% rate compounded daily works out to an APY of about 4.08%, so the two numbers are never quite the same unless the account compounds only once a year. Banks advertise savings accounts by APY, which is why comparing an APY against a rate makes one account look worse than it is.
How do you calculate APY?
APY equals (1 + r divided by n) raised to the power of n, minus 1, where r is the nominal annual rate as a decimal and n is the number of compounding periods in a year. For 4% compounded daily that is (1 + 0.04/365) to the power of 365, minus 1, which comes to 4.08%.
Does a higher APY always mean more money?
Between two accounts you can actually use, yes, because APY already accounts for compounding. What it does not account for is fees, minimum balances that trigger charges, or a rate that only applies up to a balance cap. A slightly lower APY with no monthly fee often beats a higher one with a fee you will not avoid, so check the account terms alongside the number.
Is a savings APY fixed?
No. A savings or money market APY is variable and the bank can change it at any time, usually without notice, and often after the Federal Reserve moves its target rate. A CD is the exception: its rate is locked for the term. This is why the projection here holds the rate flat and calls it arithmetic rather than a forecast.
How much difference does one percentage point actually make?
More than most people expect on a large balance and over a long period, and less than most people expect on a small one over a short period. On $10,000 held for five years, moving from 0.38% to 4.00% is worth roughly $2,000. On $1,000 for one year it is about $36. Use the compare mode with your own balance rather than trusting a rule of thumb.
Should I switch accounts for a slightly better APY?
Work out the dollar figure before deciding. The compare mode gives you the gap over the period you care about. Weigh that against the effort of opening an account and moving the money, and against whether the higher rate comes with conditions such as a minimum balance or a limited-time promotional period.
What to do next
Want to know when the savings landscape changes?
We will email you when the Federal Reserve moves its target rate, when the FDIC publishes new national averages, and when we publish a newly verified comparison. We do not track individual banks’ APYs and we will not pretend to, so this is an infrequent email about things that genuinely change the picture.
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