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 by Rakesh Choudhary, PhDMethodology & sources · 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% | 5.095% | 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 of 1991, carried out by Regulation DD, requires a bank that advertises a rate of return on a deposit account to state it as an APY, 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 5.095%, 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 0.0106 percentage points, meaningful at $1,000,000 ($105.60/year), barely noticeable at $5,000 (53¢/year).
2026 rate landscape, where to actually park money
Deposit rates move with the Federal Reserve and differ widely from bank to bank. For a benchmark, the FDIC publishes national averages every month: as of September 21, 2026, the national average was 0.37% for savings, 0.63% for money market accounts, 0.07% for interest checking and 1.73% for a 12-month CD. Treasury bill yields are set at each auction and published on TreasuryDirect.
The biggest mistake: leaving meaningful savings in an account that pays close to nothing. Online high-yield savings accounts often pay far more than the national average, so it pays to compare the APY each bank advertises. Switching costs five minutes and an ACH link.
CDs lock in a rate for the term, but you can't take the money out early without a penalty. CD ladders (buying multiple CDs maturing in staggered intervals) balance yield and liquidity. Treasury bills are free of state and local income tax, which is worth roughly the yield times your state tax rate: at a 4% yield and a 9.3% state rate, about 0.37 of a percentage point.
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 equals 4.62% taxable for someone in the 35% federal bracket (3% ÷ 0.65). 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, per ownership category. 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. For interest compounded at least once a year and left to grow, APY is at least the stated rate.
APY vs APR, what's the difference?
On a savings account or CD, the APR people quote is the plain interest rate before compounding (Regulation DD simply calls it the interest rate), and the APY is what that rate yields over a year once interest earns interest: 5% compounded monthly is a 5.12% APY. On a loan, APR is a different measure: Regulation Z's APR also counts finance charges such as points and fees, so it can sit above the loan's rate. Compare APYs between savings accounts and APRs between loans.
How does compounding frequency affect APY?
More frequent compounding = higher APY. Example with 5% APR: Annual = 5.000% APY. Quarterly = 5.095%. 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): 4.1-4.4%. 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.