APY, or annual percentage yield, is what a deposit earns in a year once compounding is counted. Enter the account's interest rate and how often interest is credited, and the calculator turns them into the APY.
For a US savings account, you usually won't need to convert. Federal rules require any advertised rate of return to be stated as an APY. The calculator helps when a rate comes without one, or to see what compounding adds.
Interest rate vs APY: the two numbers on a disclosure
Regulation DD, the federal Truth in Savings rule, defines both terms. The interest rate is the annual rate "which does not reflect compounding." The APY reflects the interest rate and "the frequency of compounding for a 365-day period."
The rule's appendix works it out in dollars. For a 365-day term, APY is simply interest ÷ principal: $61.68 earned on $1,000 is an APY of 6.17%.
An ad that states a rate of return must call it the annual percentage yield. It may show the interest rate too, but "not more conspicuously" than the APY.
What does more frequent compounding add?
Less than you might expect. Here's a 5% interest rate at each setting the calculator offers:
| Interest credited | APY on a 5% interest rate | Added by compounding (points) |
|---|---|---|
| Annually | 5.00% | 0.00 |
| Semi-annually | 5.06% | 0.06 |
| Quarterly | 5.09% | 0.09 |
| Monthly | 5.12% | 0.12 |
| Daily | 5.13% | 0.13 |
Going from yearly to monthly adds 0.12 of a point. Monthly to daily adds just 0.01 more. On $10,000 over a year, that last step is worth about a dollar.
The rate matters far more than the frequency
The extra from compounding grows with the rate, roughly with its square. Double the rate and the extra about quadruples. Every row below is credited monthly:
| Interest rate, credited monthly | APY | Added by compounding (points) |
|---|---|---|
| 0.37% | 0.37% | 0.00 |
| 2% | 2.02% | 0.02 |
| 4% | 4.07% | 0.07 |
| 8% | 8.30% | 0.30 |
| 24% | 26.82% | 2.82 |
The first row is the FDIC's national savings rate for September 2026: 0.37%. It's an average across banks and credit unions, weighted by each one's share of deposits. At that level, compounding adds less than 0.01 of a point.
So compare accounts by APY and let the frequency take care of itself. A higher rate is worth far more than daily crediting.
What an APY assumes you'll do
Regulation DD computes APY as if "all principal and interest remain on deposit for the entire term." It also assumes no other deposits or withdrawals. Real accounts rarely sit that still.
If you withdraw the interest each month, you earn the plain interest rate, not the APY. If you add money, each deposit earns only for the time it's there. To project a balance with regular deposits, use the savings calculator.
The fine print that comes with an advertised APY
When an ad states an APY, Regulation DD requires it to state several things clearly and conspicuously. Four matter most when you compare accounts:
- Variable rates can change. For a variable-rate account, the ad must say the rate may change after you open it.
- A time limit or a date. It gives how long the APY is offered, or the date it was accurate.
- A minimum balance. It states the balance you need to earn the advertised APY.
- Fees. It must warn that fees could reduce your earnings.
Rounding matters too. APYs are shown to two decimals, and a disclosed APY counts as accurate within 0.05 of a point. A gap of a few hundredths between two accounts can come from that alone.
APY is for savings; APR works differently
Investor.gov describes a monthly rate multiplied by 12 as what's "often called the annual percentage rate (A.P.R.)." That's a rate without compounding, like a deposit's interest rate.
When interest on a debt compounds, the same math works against you. The last row above shows a 24% rate compounding to 26.82% a year. The effective interest rate calculator handles that conversion for loans and cards.
Sources
- eCFR, 12 CFR Part 1030, Truth in Savings (Regulation DD), §§ 1030.2, 1030.3, 1030.8 and Appendix A (up to date as of September 22, 2026)
- CFPB, Appendix A to Part 1030, Annual Percentage Yield Calculation
- Federal Reserve Bank of St. Louis (FRED), National Rate: Savings, source FDIC (September 2026 observation, updated September 21, 2026)
- SEC Investor.gov, Glossary: Annual Return