APY Calculator
Convert APR (nominal rate) to APY (effective yield) with any compounding frequency. APY is the true annual return on savings, CDs, and money market accounts.
Reviewed & updated for 2026 · How we calculate
APR → APY reference at common rates
| APR | Annual | Quarterly | Monthly | Daily |
|---|---|---|---|---|
| 3% | 3.000% | 3.034% | 3.042% | 3.045% |
| 5% | 5.000% | 5.094% | 5.116% | 5.127% |
| 7% | 7.000% | 7.186% | 7.229% | 7.250% |
| 10% | 10.000% | 10.381% | 10.471% | 10.516% |
Why APY exists and what it actually tells you
APY exists because nominal interest rates lie when there's compounding. A bank advertising "5% interest" might mean 5% APR compounded monthly, which produces 5.116% in actual annual return. A different bank advertising "5% APY" produces exactly 5% effective return. The Truth in Savings Act (Regulation DD, 1991) forced banks to advertise APY on deposit accounts so consumers can compare apples to apples.
The math: APY = (1 + r/n)^n − 1, where r is the nominal annual rate and n is the number of compounding periods per year. For continuous compounding (theoretical maximum), APY = e^r − 1. The gap between APR and APY widens with the rate (a 1% APR barely differs from 1% APY no matter how often you compound; a 20% APR compounded daily gets you to 22.1% APY).
The diminishing returns of more frequent compounding flatten out quickly. With 5% APR: annual compounding produces 5.000% APY, quarterly is 5.094%, monthly is 5.116%, daily is 5.127%, and continuous is also 5.127% (rounded to 3 decimals). Going from monthly to daily compounding adds about 0.011 percentage points, meaningful at $1,000,000 ($110/year), barely noticeable at $5,000 (55¢/year).
2026 rate landscape, where to actually park money
After the Federal Reserve's pivot cycle that began in late 2024, deposit yields have moderated from peaks but remain attractive. 2026 benchmark rates: 1-month T-bills around 4.0-4.3%; 3-month T-bills 4.1-4.4%; top high-yield savings accounts (HYSA) 4.0-4.7% APY; brokered CDs 12-month 4.3-4.8%; money market funds 4.2-4.6%. Traditional bank checking accounts pay 0.01-0.05% APY, a 100x gap from HYSA, often on the same balances.
The biggest mistake: leaving meaningful savings in a brick-and-mortar bank's standard savings account. Bank of America, Wells Fargo, Chase, and Citi pay roughly 0.01-0.05% on basic savings, earning $1-$5 per $10,000 per year. The same dollar in an online HYSA like Marcus, Ally, Discover, Synchrony, Capital One 360, SoFi, or Wealthfront earns $400-$470. Switching costs five minutes and an ACH link.
CDs offer a yield premium for locking up funds. A 12-month CD often pays 0.2-0.5% more than HYSA but you can't access without penalty. CD ladders (buying multiple CDs maturing in staggered intervals) balance yield and liquidity. Treasury bills are tax-free at state level, for residents of California, New York, or Hawaii, that's effectively a 0.5-1.0% yield boost over taxable HYSA on the same nominal rate.
When APY isn't what it seems
- Promotional / "as high as" APY: A bank advertising "5.00% APY*" often offers it only on balances under a tier (e.g., first $25,000), or only with direct deposit + 15 monthly debit transactions. Read the requirements.
- Variable vs fixed: HYSA and money market APYs are variable, banks can change them tomorrow. CDs lock in the APY for the term. When rates are expected to fall, lock in CDs; when rising, stay variable.
- Taxable equivalent yield: A muni bond paying 3% federal tax-free can equal 4.55% taxable for a 34% federal bracket filer. Always compare after-tax yields, not raw APYs, across different account types.
- Inflation-adjusted yield: A 4.5% APY in 3% inflation is a 1.5% real return, better than nothing, but not the wealth-builder it sounds like. Real returns matter for long-term wealth planning.
- FDIC vs SIPC vs uninsured: Bank HYSA is FDIC-insured to $250,000 per depositor per bank. Brokerage cash sweep accounts may be insured via partner banks (verify). Crypto "high APY" accounts are uninsured, and several collapsed in 2022-2023 taking depositor funds with them.
FAQs
What is APY?
APY (Annual Percentage Yield) is the effective annual interest rate accounting for compounding. Higher APY = better return. Formula: APY = (1 + r/n)^n − 1, where r is the nominal rate and n is the compounding periods per year. APY is always greater than or equal to APR.
APY vs APR, what's the difference?
APR (Annual Percentage Rate): the nominal/stated rate, doesn't include compounding. APY: actual yield after compounding. For loans: APR is what you owe. For savings: APY is what you earn. A 5% APR compounded monthly = 5.12% APY. The more frequent compounding, the bigger the gap.
How does compounding frequency affect APY?
More frequent compounding = higher APY. Example with 5% APR: Annual = 5.000% APY. Quarterly = 5.094%. Monthly = 5.116%. Daily = 5.127%. Continuous = 5.127%. The diminishing returns plateau after monthly, daily and continuous are barely different from monthly.
What's a good APY?
2026 benchmarks: High-yield savings: 4-5% APY. Standard savings: 0.05-0.1% APY. CDs (12-month): 4.5-5.5%. Money market: 4-5%. Checking accounts: 0.01-0.05%. T-bills (3-month): ~5%. Always shop around, rate differences across banks are huge.
Is APY guaranteed?
Fixed APY (CDs, T-bills): yes for the term. Variable APY (savings, money market): no, banks can change at any time. When interest rates fall, variable APYs drop quickly. CDs lock in current APY for the term, useful when you expect rates to fall.